Rising Popularity of Buy Now, Pay Later Services
Buy now, pay later (BNPL) programs have rapidly gained traction among U.S. consumers by offering a convenient alternative to traditional credit cards. These services enable users to divide purchases into short-term, typically interest-free installments, appealing to those seeking flexible payment options.
According to eMarketer, an estimated 86.5 million Americans utilized BNPL loans in 2024, with forecasts projecting an increase to 91.5 million users in 2025. A LendingTree survey further highlights the widespread adoption, revealing nearly half of Americans have engaged with BNPL platforms like Affirm or Klarna at least once, and 11% have done so six or more times.
Impact on Credit Card Industry and Banks
BNPL’s growing popularity presents a direct challenge to credit card providers. Moshe Orenbuch, senior analyst at TD Cowen, notes that BNPL was largely designed for consumers who either prefer to avoid credit cards or lack sufficient available credit.
Kevin King, vice president of credit risk and marketing strategy at LexisNexis Risk Solutions, explains that purchases financed through BNPL often replace transactions that would have otherwise been conducted via credit cards or checking accounts. This shift diminishes card transaction activity and utilization rates, which are crucial drivers of revenue for financial institutions.
Concerns Over Credit Risk Transparency
Beyond revenue implications, banks and credit card companies are increasingly wary of the opaque nature of BNPL in consumer credit reporting. King describes BNPL as a “giant black hole” in credit profiles, complicating lenders’ ability to accurately assess consumer creditworthiness.
Michael Linford, COO of Affirm, observes that while credit itself is not new, traditional credit cards have struggled to evolve in line with consumer preferences. The widespread adoption of BNPL alternatives signifies a notable shift in how consumers manage credit.
Looking Ahead
As BNPL usage expands, financial institutions face mounting pressure to adapt to changing consumer behaviors and address the associated risks. Monitoring how BNPL impacts credit markets and consumer credit profiles will be critical for banks and credit card companies moving forward.
FinOracleAI — Market View
The rise of buy now, pay later services is likely to exert sustained pressure on credit card transaction volumes and utilization, negatively affecting revenue streams for banks and card issuers in the short term. The lack of transparency in BNPL credit reporting introduces additional credit risk management challenges, potentially increasing default risks. Market participants should watch regulatory responses to BNPL and evolving credit data integration efforts as key factors influencing future impact.
Impact: negative
