Financial product innovation in the United States means new or materially changed ways to access, pay for, store, or transfer money and credit. The clearest consumer examples are buy now, pay later (BNPL) loans, pay-by-bank transfers, and nonbank payment apps. Each can make paying easier, and each can benefit users or merchants under the right conditions. The official evidence does not support treating any of them as automatically safe or automatically cheaper. Whether one helps you depends on its terms, on where your money is held, and on how well the transaction is secured. The sections below work through each of those points product by product.
What counts as financial product innovation in this article
This article uses a consumer-facing definition: any new or materially changed way to access, pay for, store, or transfer money and credit. It covers three product families with official U.S. sources behind them: BNPL, pay-by-bank (including open-banking) payments, and nonbank payment apps. It does not rank all innovation categories and does not project market growth. Insurance technology, investment products, digital assets, and earned wage access would need product-specific sources before any comparison is made, so they are not discussed here.
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Buy now, pay later: a loan at the point of sale
What BNPL is under CFPB guidance
The Consumer Financial Protection Bureau (CFPB) describes the common BNPL form as an installment loan that lets you buy now and repay over four or fewer payments. Common plans may be interest-free, but late fees can apply, and terms differ from provider to provider. The practical consequence is that BNPL should be evaluated the way you would evaluate any short-term credit product, not as a payment method with no cost attached. The CFPB’s consumer guidance starts from the plain-language question “What is a Buy Now, Pay Later (BNPL) loan?”, which is a useful test for any offer you are shown at checkout.
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The Federal Reserve Board’s Report on the Economic Well-Being of U.S. Households in 2024, published in 2025, found that 15% of adults used BNPL in the preceding 12 months, up from 14% in 2023 and 10% in 2021. These figures come from 2024 household survey data. Newer editions of the Federal Reserve’s household reports may have been published since, so check them for the latest numbers before relying on these percentages.
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Among BNPL users in that report, 87% said they used it to spread out payments, and 82% cited convenience. These are self-reported reasons. They describe what users say drew them to the product; they do not show that BNPL improves financial well-being.
Where outcomes get uneven
In the same report, nearly one-fourth of BNPL users said they were late making a payment. That is the figure a borrower should weigh most heavily against the convenience. It is a survey association, not a finding that BNPL caused those late payments, and the survey does not establish why they occurred. What it does establish is that missed-payment terms deserve attention before you accept a plan. The side-by-side table below lists the checks that apply.
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Pay by bank: moving money straight from a bank account
Pay-by-bank transfers funds directly from a payer’s bank account to a payee. A Federal Reserve FEDS Note on pay-by-bank published in 2025 says the method may offer merchants a cost-efficient and secure alternative to cash and cards. The same note stresses that the actual value depends on implementation and on consumer adoption. A cheaper payment rail is only useful if enough people choose to use it.
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Why trust, more than technology, is the stated barrier
The FEDS Note reports that 56% of surveyed individuals cited security and trust concerns as their top reason for not using open-banking payments. That figure describes why non-users stay away. It is not a measure of how often fraud occurs, and it should not be read as evidence that pay-by-bank is insecure. It does show where adoption is stuck.
Rank #3
The risk categories the Federal Reserve names
The FEDS Note discusses several categories of risk. None of them is measured as an incidence rate in the material cited here, but each is a practical question to ask before you pay:
- Fraud and privacy: how your account data is shared, stored, and protected.
- Cybersecurity and operations: how the bank, the provider, and the merchant handle outages and attacks.
- Dispute handling: how a payment is reversed or contested. Because pay-by-bank does not work like a card, confirm the process before you pay rather than assuming it matches what you know from cards.
- Third-party dependence: the provider you have never dealt with that sits between your bank and the merchant.
Payment apps: where the money actually sits
“Payment app” covers several different things, and they carry different protections. Keep three apart:
- The person-to-person transfer function, which moves money to another user.
- The stored app balance, which is money held inside the app.
- The linked bank account, which the app draws from or sends money to.
A CFPB issue spotlight on nonbank payment apps warns that funds held in an app-stored balance can be at risk if the platform operator fails, and that such balances may lack individual deposit insurance coverage. A balance in a payment app is therefore not automatically equivalent to an insured bank deposit. Whether it is depends on how the account is structured, which is why the steps below start with the question of where the money is held.
Steps before you keep a balance in a payment app
- Find out whether your balance is held by the app operator or at a bank. Check the app’s terms and account documentation rather than relying on the app’s marketing language.
- Ask whether deposit insurance covers that balance and, if it does, in what form. Do not assume coverage because the app is widely used.
- Check how long a transfer out to your bank takes, before you need the money.
- Keep only the balance you need inside the app, and hold the rest in an account whose protections you have confirmed.
Side-by-side checks for the three products
The three products do not share one set of protections, so the questions that matter differ. “Not stated” means the cited CFPB or Federal Reserve material does not address that point for the product. It does not mean the product lacks the feature.
Best Value
| Check | Buy now, pay later | Pay by bank | Payment apps |
|---|---|---|---|
| Cost | Total cost and late fees | Merchant cost, per the 2025 FEDS Note | Not stated |
| Timing | Payment schedule, four or fewer payments | Speed of payment | How quickly money can be moved out |
| Missed payment or provider failure | What happens when a payment is missed | Third-party dependence | Not stated |
| Disputes and refunds | Dispute and refund handling | Payment reversibility and dispute process | Not stated |
| Security, fraud, and privacy | Not stated | Fraud exposure, security practices, and privacy practices | Not stated |
| Protection of funds | Not stated | Not stated | Whether balances are exposed if the operator fails, and whether individual deposit insurance applies |
| Reporting and affordability | Whether repayment is reported, and whether installments fit your monthly budget | Not stated | Not stated |
How regulators frame the trade-off
Michael S. Barr, the Federal Reserve’s Vice Chair for Supervision, put the policy view this way in a speech on February 27, 2025: “Innovation can make financial products and services better, cheaper, and safer.” In the same speech he added: “Innovation also comes with risks that need to be managed responsibly.” The speech states a policy outlook rather than an empirical finding, so it is best read as a frame for the evidence above, not as proof that any particular product delivers those benefits.
Long-term opportunities, stated conditionally
The evidence supports a bounded argument. Lower friction at checkout, broader access to payments and credit, and more efficient payment rails could benefit consumers and merchants. The evidence does not establish how large those gains will become, and it does not show that any category will grow. The benefits are conditional on three things holding at the same time: the product works as described, consumer protections such as clear disclosure of terms and deposit insurance status match the product’s risk, and data security and operational resilience keep pace with adoption.
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