The Convergence of Payment Gateways and BNPL
The boundaries between payment gateways and credit providers are blurring fast. Today’s Buy Now, Pay Later (BNPL) systems are no longer standalone apps—they are embedded directly into payment gateways, giving customers seamless access to short-term credit at checkout. This integration is changing the core architecture of online payments.
Globally, players like Stripe, Adyen, and Checkout.com have started embedding BNPL rails into their core gateway APIs. Instead of redirecting users to third-party lenders, merchants can now activate “pay later” options directly from their dashboard. In India, fintechs like Razorpay, Pine Labs, and PayU are doing the same by connecting credit lines and UPI-based lending within their payment infrastructure.
According to a 2026 Deloitte Fintech Outlook, BNPL volumes could exceed $680 billion globally by 2030. This shift is largely powered by payment gateways acting as distribution channels for credit—integrating lending models with merchant ecosystems. Insight: Payment gateways are evolving from payment pipes to credit networks — offering liquidity right at the point of purchase. Inside the BNPL-Enabled Payment Infrastructure Modern BNPL-enabled gateways operate on embedded finance principles. Through Bnpl Credit Api, fintechs connect merchants, lenders, and consumers in real time. Each transaction triggers eligibility checks, underwriting, and instant credit approval—without leaving the checkout page. For example, Stripe’s “Credit at Checkout” API integrates with lenders like Affirm and Klarna, while Adyen’s platform offers post-payment installments across 30+ markets. These integrations rely on machine learning to assess risk within milliseconds using transaction data, device identity, and past repayment history. In India, the model takes a slightly different shape. Gateways like Razorpay and PayU embed small-ticket credit lines within merchant checkout flows. They partner with NBFCs to offer regulated lending under RBI norms. Buyers see flexible repayment options—such as three- or six-month EMIs—directly within the payment screen, improving conversion and retention rates for merchants. On the backend, payment gateways act as data bridges. They aggregate behavioral insights, repayment trends, and purchase frequency to improve credit decisions. This makes BNPL more predictable and scalable compared to standalone lenders. Tip: The smartest BNPL ecosystems rely on gateways’ transaction intelligence to build safer, faster, and compliant credit systems. RBI and Policy Outlook on Embedded Finance The Reserve Bank of India (RBI) has played a pivotal role in ensuring that embedded credit remains both innovative and responsible. The Digital Lending Guidelines 2025 clarified accountability for fintech platforms, regulated Loan Service Providers (LSPs), and emphasized transparent pricing. These measures prevent misuse while maintaining room for innovation. RBI’s framework requires that all loans be disbursed directly from banks or NBFCs to the borrower’s account, even if originated through a fintech. This ensures traceability and consumer protection. The upcoming consultation on embedded finance regulation will extend these principles to platform-based credit. Fintechs operating under [INTERNAL_LINK:digital-lending-framework] are also collaborating with banks to provide co-lending models—where risk is shared, but distribution remains digital. Additionally, the government’s push through the Open Network for Digital Commerce (ONDC) is creating a neutral marketplace where credit providers can plug in seamlessly. According to PwC India, the embedded finance market could reach $15 billion in annual disbursements by 2027, driven primarily by SME participation on e-commerce platforms.
Opportunities and Challenges Ahead
The marriage between payment gateways and BNPL is transforming e-commerce financing. For merchants, it means higher average order values and customer retention. For fintechs, it unlocks new revenue streams through data-driven credit distribution. Yet, challenges around default risk, compliance, and ethical lending remain front and center.
Fintechs adhering to Fintech Regulation Global are addressing these issues through transparent repayment disclosures and customer education. Regulators from India’s RBI to Europe’s EBA now emphasize credit discipline, clear interest disclosures, and borrower consent. The next wave of BNPL innovation will likely revolve around sustainability, inclusion, and AI-based risk management.
In emerging markets like India, where over 80 million consumers are first-time borrowers, responsible design will be the defining factor. Payment gateways will continue to play the dual role of infrastructure providers and compliance guardians.
Ultimately, BNPL within gateways signals a new phase of fintech evolution—one where credit, payments, and compliance exist on the same digital rail.
Innovation in fintech isn’t about speed — it’s about sustainability and shared progress.
Frequently Asked Questions
1. What is embedded credit for e-commerce merchants?
It’s an integrated form of lending that allows merchants to access working capital directly within their online platforms or payment apps.
2. How does embedded credit help small sellers?
It offers instant, data-driven loans based on sales performance, removing the need for collateral or paperwork.
3. Is embedded credit regulated in India?
Yes, RBI’s digital lending norms apply, ensuring that loans are disbursed through regulated entities like banks or NBFCs.
4. What role does ONDC play in this ecosystem?
ONDC enables open credit access for all merchants by connecting platforms, lenders, and payment systems through shared APIs.
5. What risks should merchants consider?
Merchants must track repayment terms, interest rates, and platform fees to avoid hidden costs or dependency on short-term credit.