Rise of Buy Now, Pay Later: A Closer Look at Consumer Spending Trends

The BNPL trend gained significant momentum during the COVID-19 pandemic, leading to a 14.3% increase in online spending, which totaled $75 billion in 2023. Providers like Affirm and Klarna have enabled consumers to make purchases by offering installment payment options, often allowing repayment over periods of up to 36 months, although four-installment plans are the most common.

While comprehensive data on BNPL delinquencies remains scarce—mainly because most providers do not report their loans to credit agencies—statistics reveal that the delinquency rate among BNPL users is significantly lower than that of credit cards. The Financial Technology Association reports a delinquency rate of less than 2% for BNPL loans, in contrast to nearly 9% for traditional credit cards. Nevertheless, a study by the Federal Reserve Bank of Boston found that 71% of BNPL users also carried credit card debt in 2023.

Afterpay, a subsidiary of Block, reported that 96% of its customers made timely payments in the fourth quarter of 2023. Similarly, Klarna noted that 96% of its pay-in-four users paid their bills early or on time during the same period. For Affirm, 2.4% of loans were delinquent by more than 30 days in the three months ending June 30, 2024.

BNPL Spending Insights

Adobe Analytics highlights that consumers spent over $731.5 billion online between January and September this year, with $57.6 billion of that attributed to BNPL transactions. This marks a 10.3% increase from the same timeframe in 2023. The anticipated $18.5 billion in BNPL purchases for the upcoming quarter would represent an 11.4% year-on-year increase.

As BNPL continues to shape consumer behavior, understanding its impact on spending habits and the broader financial landscape remains crucial for both consumers and financial institutions alike.