Our Take
The size divide reveals BNPL adoption costs that small banks can't absorb, not philosophical differences about consumer lending.
Why it matters
Financial institutions face a customer retention dilemma as 37% of consumers now use BNPL (per JD Power), but smaller banks lack resources to compete with fintech providers who dominate awareness.
Do this week
Community bank leaders: audit your commercial lending customers' BNPL partnership needs before Q2 so you can retain deposit relationships when they switch payment providers.
National banks embrace BNPL while community banks resist
American Banker surveyed 186 banking professionals in March 2026 and found stark divides by institution size on buy-now-pay-later adoption (per American Banker research). National banks showed strongest support, with 48% agreeing BNPL benefits banks overall, 40% neutral, and 11% opposed.
Community banks showed the inverse pattern: 32% opposed BNPL for banks, 23% supportive, and 44% neutral. Credit unions were most hesitant, with 64% neutral, 25% opposed, and just 7% supportive.
Among banks already offering BNPL, results were more positive. Two-thirds agreed their BNPL products deliver institutional value, with 58% reporting revenue generation and 58% citing competitive advantages (company-reported). Additional benefits included cross-selling opportunities (46%) and merchant relationship building (37%).
Customer usage outpaces bank awareness
Consumer adoption creates pressure on traditional lenders. JD Power data from March shows 37% of all consumers and 50% of under-40 consumers used BNPL in the past 90 days, up five percentage points year-over-year (per JD Power research).
The awareness gap works against banks. Sean Gelles at JD Power noted that while consumers recognize Klarna, Afterpay and Affirm, "many customers of larger financial institutions don't even know that their banks offer these products."
Regulatory uncertainty compounds the challenge. The Consumer Financial Protection Bureau's stance shift under new leadership has reduced compliance hurdles, but banks remain cautious about diving deeper into the space.
Size determines BNPL strategy
The survey data suggests resource constraints, not lending philosophy, drive the community bank hesitation. National banks can absorb compliance costs and technology investments that strain smaller institutions.
For community banks, the defensive play may be indirect. Lane Greer at Fullstory argued BNPL becomes "a defensive necessity" because customers will find fintech alternatives for emergency expenses like car repairs if their primary bank doesn't offer installment options.
Banks with existing BNPL offerings report value creation, but the 28% neutral responses among current providers suggest returns vary significantly by implementation and market position.