The recent development of Buy-Now-Pay-Later (BNPL) checking accounts has prompted me to discuss some interesting developments in the retail checking account world. The first is this BNPL checking. This product allows a consumer to make a debit card purchase and then divide it into a number of fixed installments, with payments to be made over time. I am excited about the product, but because it is so new, there has not been any long-term data collected about its efficacy, so it’s hard to gauge whether it is worth implementing.

An observer might think that only low-income consumers would use BNPL. However, there appears to be a convenience reason for its use. When we asked consumers if they had used a BNPL service in the last 12 months, we found that usage hovers around 20% regardless of income (Table 1). We also found that usage trends younger.

Table 1: BNPL Usage by generation and income segments 

BNPL has traction across generations and incomes

Source: Raddon Research Insights, 2025

This suggests that there may be a market for a BNPL checking product. But even if a consumer uses a BNPL service at checkout, they may not be excited about a checking account that offers the service. However, one benefit of using a single checking account for such a service is that the checking account may help the consumer keep track of all the BNPL purchases they have made because they are all made in one place, rather than with a variety of providers.

From a strategy perspective, BNPL checking ticks a few boxes. These relate to non-interest income, loan income, checking sales, and regulatory agility. Institutions offering BNPL checking have the option to charge a fee for each debit card purchase that is converted to a BNPL payment schedule. Plus, it is a loan and should generate loan income. BNPL is a differentiator for checking, addressing sales challenges that are a perpetual challenge for community financial institutions. Finally, if marketed well, this could be positioned as an “overdraft in advance” service, which means it is not actually overdraft income. Should the regulatory winds shift again to try to limit overdraft revenue, this type of product could fill at least part of that gap.

We are seeing more efforts in the fintech space to attach BNPL functionality to debit card use. I think that banks and credit unions can more successfully deploy BNPL than fintechs because of their deposit-flow history. A BNPL feature as a part of a checking account would usually be in the context of a history of deposit inflow/outflow information over a long period of time for each user, which would inform the institution’s underwriting for the product.

Another innovative checking idea I have come across recently is a checking account with incentives to generate credit card transactions. A little over a decade ago, a new checking account product showed up on the landscape that allowed consumers to gain a high rate on their checking account balances assuming they had a sufficient number of debit card transactions and mobile banking logins, accepted e-statements, and performed other activities. I have supported that product design for many clients over the years. It is somewhat a bait and switch, because a big benefit of that product is that the financial institution can advertise a high rate, but only about half of the balances qualify for the rate each month due to the hurdles required. Thus, the true impact on cost of funds is half of what is advertised. Even with that caveat, there are contexts where that product makes a lot of sense. My only issue with this product is that many consumers tend to carry higher balances in checking accounts but are not heavy debit card users (notwithstanding the balance caps these accounts generally carry). Many high-checking-balance people frequently are older, higher-income individuals that use credit cards for everything. 

Table 2: Debit and credit card use by generation and income segments

Debit card payment preference is not universal

Source: Raddon Research Insights, 2024

While debit card use does span all ages and income levels, there are plenty of credit card users who would have no interest in a checking account where the rate is driven by debit card usage (Table 2).

A high-rate checking account where the rate is determined by the number of credit card transactions also checks a lot of strategy boxes:

• Higher checking rates may be attractive to consumers that are more oriented toward credit card usage and carry higher checking balances

   

• The credit card market is hyper competitive – the ability to differentiate against the airlines and other affinity card issuers has strategic value
• Credit card adoption tends to boost the consumer’s relationship with the institution in other products – presence of the credit card frequently indicates substantially higher consumer loyalty at community-based institutions.

Such an offering would connect two products used by higher-income/older consumers. I imagine the percentage of balances that would receive the rate would be much higher than 50% in this context.

I recently came across an institution that offered a checking account suite that boosted the interest rate by either debit card or credit card transactions. Their data supports an interesting progression in relationship development that typically occurs when our consumers have checking and a credit card with us.

Table 3: Credit card and debit card rewards checking comparison

Debit and credit card features with checking drives loyalty

Source: Client Data

This institution is addressing its overall checking penetration deficit due to less branch convenience than many community institutions; however, from a relationship development perspective, the checking suite demonstrates a progression in loyalty with the debit-transaction-rewarded and credit-transaction-rewarded accounts (Table 3). The higher deposit balances and lower loan balances per household are driven by the debit rewards checking customers being younger in age and having fewer deposits and more loans. Debit rewards users had an average age of 45, with the credit-rewards checking having an average age of 50.

I am always intrigued by interesting approaches to deposit product offerings. Too often we look at deposits as just a function of rate and access. Any time we can shake things up with some interesting features, you have my attention. As long as the profitability pathway remains, I am a fan of efforts to spice up the deposit landscape.