For the last two years, Buy Now Pay Later (BNPL) programs have been the fastest growing segment of the consumer credit market.

BNPL lets consumers pay for purchases in fixed weekly, biweekly, or monthly installments. Borrowers who make payments on time can avoid paying interest. And it gets better: BNPL programs that stretch payments over six weeks and charge no extra fees offer borrowers the equivalent of an interest-free loan that is 50% longer than the customary grace period for credit cards.

Consumers are embracing BNPL in large numbers, but it turns out it’s not their ideal form of payment. According to a survey of 2,237 qualified respondents conducted by PYMNTS.com in November 2021, consumers don’t want to manage multiple BNPL loans. They want a single card that offers a variety of repayment options, including BNPL.

Such products weren’t possible with traditional loan management systems. They have become an option with the development of modern loan management and servicing platforms , like Canopy Servicing.

Flexible payment products arrive

According to PYMNTS, 45% of the adult population of the United States wants the convenience of a credit card coupled with the more flexible payment terms of Buy Now, Pay Later.

Both American Express and Visa have announced approval for convertible credit constructs. American Express calls its product “Plan It. ” The Amex card lets borrowers split up large purchases into monthly installments with a fixed fee, while continuing to earn rewards. Citbank’s Citi Flex Pay is marketed as making large purchases more manageable.

So far, these products have not been widely adopted. McKinsey says that is because early versions have not been competitive with traditional 0% APR products offered at the point of sale by both credit and some Buy Now Pay Later programs.

This creates a green field for innovative banks and Fintechs to offer more attractive convertible credit products, particularly at the point of sale, which McKinsey projects will grow from 7% of U.S. unsecured lending balances in 2019 to about 13–15% of balances by 2023.

“Banks that underestimate the threat may see continued loss in share and could lose out on participating in a growing value pool and gaining share among younger and new-to-credit customers,” McKinsey warns. “Even the largest merchants that have shied away from these products [BNPL], in part to limit cannibalization of their private-label credit card portfolios, are now integrating these offerings at checkout.”

Banks are answering the call for convertible credit

Karen Webster, CEO of PYMNTS, says that traditional banks may be uniquely positioned to take advantage of convertible credit. “It probably isn’t lost on banks that what consumers say they want sounds very much like the value proposition that they’ve have been promoting to their cardholders for about the last six decades,” she writes.

But Canopy’s conversations with clients and prospects reveal a wide open field with no obvious favorites. Which convertible credit products will most resonate with the evolving preferences of different consumer cohorts has yet to be determined. But one thing is sure: Products that are personalized, transparent, and safer for borrowers and lenders will have the highest odds of success.