Banks Challenge BNPL Fintechs by Offering Merchants White-Label Payment Solutions

The buy now, pay later boom of 2020 looked like a straightforward story: fintechs like Affirm, Afterpay, and Klarna were disrupting payments by letting shoppers split purchases into installments. More than a third of US consumers had tried the service by mid-2020, and the market was projected to grow from 1.6% of North American payment volume to 4.5% by 2024. But somewhere along the way, these companies stopped thinking of themselves as payment processors and started thinking of themselves as consumer brands.

Affirm's CEO Max Levchin was explicit about it during the company's May earnings call: "We are not just a payment provider. We are fundamentally a marketing device for merchants." The shift was visible everywhere. Klarna launched a loyalty program. Affirm rebranded and added a high-yield savings account. Afterpay became the presenting sponsor of New York Fashion Week, letting shoppers buy runway looks directly through its app. App downloads more than doubled from 7.3 million in 2019 to 17 million in 2020. Affirm reported that more than 30% of its sales now originated on its own app and website, not through merchant checkouts. These companies had built direct relationships with consumers—relationships that were arguably more valuable than the merchant contracts that had launched them.

For merchants, especially large ones, this represented a problem. When a customer used Klarna at Macy's, Macy's was no longer the primary relationship owner. The customer's loyalty was flowing to Klarna instead. Macy's CEO Jeff Gennette acknowledged this during his company's first-quarter earnings call, saying the goal was to "convert all of these new customers to Macy's loyalty customers who return for future purchases." The BNPL providers charged merchants between 3% and 7% per transaction—higher than typical credit card fees—and in return, they were taking the customer relationship.

Traditional banks saw an opening. Barclays announced a partnership with Amount, a fintech that had spun off from Avant in 2020 and raised over $240 million, to offer merchants white-label point-of-sale financing. The model was simple: merchants could offer installment plans under their own brand, keeping the customer relationship intact. Amount would handle the technical infrastructure, fraud prevention, and loan servicing. Barclays would provide the capital and credit decisions from its existing balance sheet. Denny Nealon, CEO of Barclays US Consumer Bank, told reporters the pitch was straightforward: "If we can deliver the same product that customers want with the same speed and slick integration and digital interface that fintechs provide but can do it in a way that enhances our partners' brand and relationship with their most valuable customers, we think that's a big deal."

The Barclays-Amount partnership would target merchants with purchases over $250 and negotiate fees on an individual basis, varying them based on existing relationships and the interest rates merchants wanted to offer. Amount's software was customizable—retailers could choose interest-free "pay-in-four" plans or interest-bearing loans. Barclays wasn't alone in this strategy. Alliance Data had acquired Bread, a white-label BNPL startup, in October 2020 and was already powering RBC's PayPlan product for Canadian merchants.

What made this threat credible was that large merchants had already begun to wake up to the problem. Brian Barth, founder and CEO of Uplift, a travel-focused BNPL player, acknowledged it plainly: "It's the bigger, enterprise accounts that are going to wake up and are waking up." Uplift itself had learned this lesson early. Rather than targeting consumers directly, it worked within travel partners' existing loyalty schemes. When a customer received a notification about paying down a Southwest loan, Uplift coordinated with Southwest to drive that customer back to Southwest's website. "If we ran off with Southwest's customers and promoted a bunch of other vacation opportunities to them, they would unhook us," Barth said.

For now, some major retailers seemed content with their BNPL partnerships. Macy's reported higher spending per visit and increased acquisition of younger customers through Klarna, with nearly half of Klarna users at Macy's under 40. Affirm was making a push into travel, where it had partnerships with Expedia, Priceline, and Vrbo, accounting for 11% of its volumes by April. But the structural incentive was clear: merchants wanted to own their customer relationships, and banks had the infrastructure and balance sheets to let them do it. The question was no longer whether standalone BNPL companies could grow, but whether they could grow without becoming subordinate to the merchants and banks that controlled the customer touchpoints.