Some banks have moved to level the playing field by getting into the game.

But 38% of that amount as of last year was held by fintechs - up from 5% in 2014, American Banker reported. Outstanding balances on unsecured personal loans jumped nearly 60% from 2015 to 2019, credit reporting agency TransUnion reported. Ally's installment loans on retail purchases between $500 and $40,000 charge interest rates between 9.99% and 26.99% over a term of six to 60 months. That same month, Ally Financial announced it would also offer point-of-sale lending - with an interest rate, albeit lower than that of most credit cards - through a partnership with Mastercard's Vyze. The product would let consumers pay for a purchase of between $30 and $600 in four installments over a six-week period. PayPal jumped into point-of-sale lending in August, announcing it would launch its ' Pay in 4' platform this fall. Rather than passing the interest on to consumers, buy-now-pay-later companies charge merchants a commission for offering the option - luring them with the prospect that shoppers will make larger purchases (by up to 20%, according to data from PayPal and Afterpay) if an installment plan is available.Īdditionally, 76% of consumers surveyed by Citizens Financial Group in 2018 said they were more likely to make a retail purchase if a merchant were to offer a payment plan backed by a 'simple and seamless point-of-sale experience.'

Buy-now-pay-later platforms have gained traction over the past decade, as startups such as Affirm, Afterpay and Klarna have appealed to millennial and Generation Z consumers with a model that allows them to pay for purchases in installments without the hefty interest that comes with credit cards.

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