Buy now pay later boom shows no signs of slowing this holiday season

Betsie Van der Meer | DigitalVision | Getty Images

The buy now, pay later phenomenon is showing little signs of slowing down.

Shoppers have flocked to the option over the last year as online shopping has surged amid the pandemic, benefiting fintech companies like Affirm, Klarna, and Square's Afterpay, while also prompting other payment platforms like PayPal to move further in that direction and threatening banks and credit card companies.

Use of BNPL poised to grow this holiday season, according to a recent CNBC survey.

Seven percent of shoppers said they will be using BNPL for holiday purchases this year, according to the CNBC/Momentive Small Business Survey for Small Business Saturday. The survey was conducted by Momentive from Nov. 10 to Nov. 12 and included 2,744 respondents.

While that 7% still pares in comparison to other traditional payment methods – 55% of shoppers say that will use debit cards, 51% will pay with credit cards, and 43% say they will use cash – experts say that percentage could easily be doubled or tripled in the next year.

“The important thing is not the 7% adoption number, but the fact that the number is growing,” said Lex Sokolin, head economist and global fintech co-head at ConsenSys.  

Adoption being pushed by younger shoppers

Much of the growth of BNPL to this point has seemingly been driven by younger shoppers.

For example, 12% of the 18-34 years old demographic surveyed in the CNBC/Momentive survey said they are using buy now pay later for holiday purchases. In comparison, 0% of the 65 and older group reported they would use BNPL for holiday purchases.

“Buy now pay later user definitely skews younger,” said Ted Rossman, senior industry analyst at “It is definitely more of a Gen Z and millennial thing.”  

But the idea that BNPL only attracts young users with little money and little credit seems to be changing, according to Rossman. “A lot of these people do have credit cards, but they're using buy now pay later selectively.”

Adoption is also being aided by major retailers pushing the payment method. Affirm scored a major partnership with Amazon in August that would let customers split purchases of $50 or more into smaller monthly installments. The deal between the two companies was expanded in November. Affirm also works with more than 12,00 other merchants, including Peloton and Walmart.

BNPL is also being fueled by acquisitions. Square, which is changing its name to Block, bought Afterpay for $29 billion in August, while PayPal announced a plan to buy Japanese fintech company Paidy for $2.7 billion in September.

PayPal CEO Dan Schulman told CNBC's Jim Cramer that the company's payment service is “one of the stars, actually, of the holiday season for us.”

PayPal launched an installment payment option in the U.S. in late 2020.

“During Black Friday, our volume on buy now, pay later was up almost 400% year over year. We did some 750,000 transactions alone in one day on Black Friday,” Schulman told Cramer last week.

Overall, the use of the payment method globally during Cyber Week — from Nov. 23 to Monday — jumped 29% year over year, according to Salesforce data. On Black Friday, in particular, Salesforce said 4% of orders in the U.S. used a short-term, installment payment option.

“And they make it so easy, right at checkout,” Rossman said.

There are benefits to using this option as a short-term financial alternative when making small purchases, but also risks to using BNPL and the debt issues that consumers can potentially face in the long run.  

These fixed plans are appealing to the young adult who can't access credit, has existing student loans, and worries about open-ended credit card debt, Rossman said. For users that have come of age at a tumultuous financial time with Covid, and before that, the Great Recession, “the predictability” of the BNPL option is attractive, he added.   

Buy now pay later companies short-term financing approach can limit the delinquency risk, but in the long run, BNPL can have negative consequences for the consumer credit market, according to Sokolin. 

Sokolin says the BNPL business model is sometimes backed by transaction fees that underwrite the credit, which “moves the risk to different destinations” rather than eliminating it. 

“It is hard to boil the impact of all this down to a single vector, but overall, this does generate competition and is likely to drive down the price of borrowing,” Sokolin said. “Which in turn will generate more lending and potentially worse financial outcomes for people as they become indebted.” 

Underserved consumer demographics

Buy now pay later is moving “upmarket,” according to Rossman, with the “Henry” consumer — the high earner but not yet rich — using it more often.

This upmarket consumer has a salary of at least $75,000 and has enough credit to be approved for a credit card, but is being drawn to the predictability of the loan installments buy now pay later offers. 

“It's not necessarily that you don't have much money, or you don't have much credit, although that is sometimes the case,” Rossman said. “I think more than anything it's the predictability that certain people are drawn to. [That] again relates to young adults.” 

On the whole, income does matter. For consumers that don't qualify for a credit card due to a low credit score or income, BNPL's short-term financing is an attractive alternative. In the CNBC/Momentive survey of those using BNPL to shop this holiday season, 10% make $50,000 or less a year; while 6% of those making between $50,000 and $100,000 say they will use BNPL; and only 4% of those earning $100,000 or more.

CNBC's Small Business Survey also reported higher BNPL popularity among Black and Hispanic Americans – with 12% of Blacks saying they will use BNPL for holiday purchases and 13% of Hispanic Americans saying they will use BNPL. In comparison, only 5% of white Americans said they will use it; and 3% of Asian Americans saying they will use this payment option. Use of credit cards for holiday shopping is much higher among whites (56%) and Asian Americans (70%), versus Black and Hispanic Americans, both below 40%.

The racial gap among BNPL users brings up the question of financial discrimination or barriers for minorities trying to access financial services. “There is likely a complex, interconnected relationship between the economic structures and income distribution in the U.S., tied to racial history and labor,” Sokolin said. “There is documented ethnic bias, which is correlated with both economic status and cultural legacy,” he added.  

But because of the income and wealth gap between white Americans and minorities, it is difficult to tell break out BNPL trends apart from the broader credit industry trends. 

“I would try to understand these figures in context of overall indebtedness of households in the U.S.,” he said. “White Americans on average have higher income and have an easier time servicing debt.”

The challenge minorities face with taking advantage of purchasing alternatives like BNPL is the debt used to fund consumption, according to Sokolin.

In the study conducted by Accenture for Afterpay, it found 64% of American adults were able to pay theoretical emergency expenses of $400 with cash or from savings, while 12% of adults reported being unable to pay this emergency expense at all. For Black and Hispanic Americans, the inability to pay increased to 17% and 13%, respectively, according to the September report, “The Economic Impact of Buy Now, Pay Later In the U.S.”

An alternative financial solution like buy now pay later would “relieve a significant burden on [an] economically vulnerable individual,” the Accenture analysis stated.

But Sokolin said as with any credit option, a danger with BNPL is that consumers may not remain financially healthy enough to fund a lifestyle they get used to, and that can generate a negative credit cycle. And with the rise of fintech, BNPL adds the risk of making access to credit too easy in some cases.

“If borrowing is too easy or too gamified with incentives to make taking out debt easily available, then people will ruin their household balance sheets,” he said.

News Related


German government: natural gas is an interim solution in the energy transition

Photo: ANP The use of natural gas is necessary as an interim solution for the energy transition. The German government wrote this in a letter to the European Commission. Berlin ... Read more »

8 Features of The Best Forex Trading Platforms

Retail trading is a robust industry. Around the world, millions of people buy and sell currencies online, and the term “Forex” is now associated with broad portfolios comprising currencies, stocks, ... Read more »

Shell looks at sustainable projects in France with €4 billion in its pocket

According to Van Beurden, Shell is looking at possible investments in French offshore wind farms, charging stations for electric cars and the production of hydrogen and biofuel for aircraft. France ... Read more »

The 21-year-old College Cuber makes $8,000 mosaics of sports stars using cubes

Dylan Sadiq, known as “The College Cuber” charges $8,000 for his mosaics made of cubes. Pro teams including the NBA's Detroit Pistons have purchased the artwork.Courtesy: Dylan Sadiq | The ... Read more »

In Pics: Reliance Industries' recent acquisitions and investments

Reliance Retail Ventures (RRVL), through its wholly-owned subsidiary 7-India Convenience Retail, entered into a master franchise agreement with 7-Eleven, Inc (SEI) for the launch of 7-Eleven convenience stores in India. ... Read more »

Experts seriously doubt whether patent waivers on Covid-19 vaccines will ever come to be

It's been well over a year since a landmark proposal brought the issue of patent waiver for the mRNA Covid vaccine to the spotlight. But many observers don't see that ... Read more »

Shell looks at billions of investments in France

Photo: ANP Shell is looking at investment opportunities worth 4 billion euros in France. That says CEO Ben van Beurden in an interview with the French newspaper Le Figaro. According ... Read more »

Lufthansa would like 40% stake in Italian ITA

Photo: ANP The German aviation group Lufthansa would like to take a 40 percent stake in the Italian airline ITA Airways, the successor of the bankrupt Alitalia. That reports the ... Read more »

Crypto meltdown erases $1 trillion in value Bitcoin down 50% from November peak as risk-off sentiment batters cryptocurrencies

Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on motherboard. (Reuters File Photo) Bitcoin has now shed more than 50% from its record high in November ... Read more »

Dolo 650 maker: We did not expect this kind of popularity

Dilip Surana, chairman and managing director at Micro Labs Limited, is—with due respect to Adar Poonawalla, CEO, Serum Insitutute of India, and Bharat Biotech chairman Krishna Ella, the companies behind ... Read more »

Premji Invest backed Fabindia Files Papers For 2022 Listing; Joins Apparel Brand IPO Party

Leading ethnic wear and lifestyle retailer Fabindia which is backed by marquee investors including Azim Premji’s investment arm Premji Invest & Nandan Nilekani, has filed draft papers with Sebi to ... Read more »

S. Korea's Hanmi, Celltrion, and Dongbang to produce Merck's COVID-19 pill

Hanmi will manufacture the finished drug and produce ingredients. South Korea’s Hanmi Pharm Co., Celltrion Inc., and Dongbang FTL were among 27 drugmakers chosen to produce low-cost versions of Merck ... Read more »

Former CBI chief Fairbairn joins race to head Channel 4

Dame Carolyn Fairbairn is among the candidates being considered as the next chairman of the state-owned broadcaster as its potential privatisation looms, Sky News learns. Read more »

‘Takeover hunt for department store giant Kohl's: $9 billion bid on the table'

Insiders report this to Bloomberg news agency. The second-largest department store chain in the United States is under pressure from activist shareholders because it would underperform and the company would ... Read more »

Sources: US talks with Qatar about gas supplies to Europe

Photo: ANP The US government is in talks with Qatar about supplies of liquefied natural gas (LNG) to Europe if Russia were to invade Ukraine, causing European gas shortages. According ... Read more »

Hong Kong's home buyers snap up Henderson Land's The Harmonie flats, defying city's worst one-day explosion of new Covid-19 cases

Hong Kong’s property buyers turned out in droves, defying the city’s worst one-day explosion of new Covid-19 cases to snap up apartments at the first new housing project to be ... Read more »

Bonus rain at top US bankers: boss Morgan Stanley goes home with $35 million

The big boss at Morgan Stanley was paid a base salary of $1.5 million in 2021. On top of that came a cash bonus of $8 million and $5 million ... Read more »

Yes Bank posts 77% rise in December quarter profit on lower provisions, higher recoveries

yes-bank-300_36683164 Yes Bank on Saturday reported a 77% year on year growth in December quarter profit at Rs 266 crore as lower provisions and higher loan recoveries drove earnings at ... Read more »

Bloomberg: multi-billion dollar offer for major department store chain Kohl's

Photo: ANP The major American department store chain Kohl’s has received a takeover offer worth about $ 9 billion, converted almost 8 billion euros, from a group of investors. Insiders ... Read more »

Bitcoin rumbles further down: 25% fall in new year

On crypto platform Coindesk, bitcoin sees another 10% of its value evaporate to a position of $35,580 around 8 a.m. (Dutch time). This means that the digital currency has returned ... Read more »

Current economic landscape may not allow government to go for fiscal consolidation immediately: YES Bank chief economist

Read more »

Instagram's new subscription model: How it will aid Indian creators

While the features are being tested in the US, creators in India bet big on Instagram’s new subscription model. Instagram is testing three new subscription features under which followers can ... Read more »

Impact of oil firms' exit from Myanmar limited 'A lot more pressure needed to defeat this junta for good,' says human rights activist

The TotalEnergies logo is seen on a charging station in La Defense on the outskirts of Paris. The French company announced in Friday that it would pull out of Myanmar. ... Read more »

Payments Council urges rollback of no-fee transaction policy for UPI and Rupay debit cards

The industry estimates a loss of Rs 5,500 crore due to the Zero-MDR norm. (Representative image) The Payments Council of India (PCI), the industry body for digital payments, yesterday said ... Read more »

More trouble for PTC India as independent director quits after three board exits in arm over corporate governance issues

After PTC India Financial Services (PFS) came under the scanner with three of its independent directors resigning citing lapses in compliance and corporate governance, an independent director at the parent ... Read more »

Market falls over 3% but BSE smallcap index hits new high, 33 stocks gain 10-44%

After a positive start for the week on January 17 the Indian benchmark indices remained under selling pressure for the next four session’s in the week ended January 21 in-line ... Read more »

Ombudsman: Return to Australia for a DigiD

In the end, thanks to the help of an official Australian government agency, he manages to have his AOW paid out through the SVB. But he would also like to ... Read more »

Hawkish comments from the Fed may further strengthen the dollar which may not bode well for commodities: Kotak Securities' Ravindra Rao

Commodities witnessed strong gains this week despite the dollar strengthening and equities weakening as rising inflationary pressure drew investors, said Ravindra Rao, vice-president, head of commodity research, Kotak Securities. Inflation ... Read more »

As economies limp out of pandemic, here's how CII wants policymakers to steer post-COVID recovery

Representative image Growth appears to be limping back after COVID battered economies around the world, thanks to policy support from governments as well as vaccination drives. However, to ensure that ... Read more »

Transforming a ghost village with hill-centric livelihood and tourism opportunities

Major Gorki Chandola is reviving traditional practices in agriculture, construction and tourism to sustainably develop his village. Photo by Archana Singh. India’s northern state of Uttarakhand, known as the Land ... Read more »

Mining on the shifty sands of Goan politics

Mining machinery at a Goa mine brought to a halt by Supreme Court of India’s February 2018 judgment. Photo by Meera Mohanty/Mongabay. In the run-up to the 2022 state elections, ... Read more »

Clean energy startups innovate on products to aid farmers, rural areas

A three horse power solar panel installed in a village in Rajasthan by Agrivijay for irrigation works. Photo courtesy AgriVijay. Yash Tarwadi, 25, is a chemical engineer based in Surat ... Read more »

Energy major Shell sheds 'Royal Dutch' from name

Royal Dutch Shell | Headquarters: The Hague, Netherlands. Incorporated in the United Kingdom. (Photo: Reuters) Energy giant Shell has dropped from its name the ‘Royal Dutch’ part, which it had ... Read more »

Moneycontrol PRO & Espresso present Nifty Banker 2.0 on Saturday, 22nd January, at 8 pm, with Rohit Katwal on “Momentum Short - Index Option Selling using trend following on Nifty and Bank Nifty”

Nifty Banker 2.0 is India’s First Retail Index Traders Online Conference to be organised in the country. Some of the best index traders in India will share their deep trading ... Read more »

Why Always Hire A Professional and Experienced Tax consultant in vienna (Steuerberater Wien)

Accounting is, above all, strategic management by taking responsibility for drawing up the accounts. It is important to have this vision. Each year, accounting produces mandatory summary documents at the ... Read more »

NetEase apologises for ‘bad experiences' after fans of Harry Potter game revolt over Lunar New Year campaign

Chinese players of a video game based on the Harry Potter series of books by J.K. Rowling have staged an online revolt against NetEase, with their complaints about unfair game ... Read more »

Cryptocurrency crash wipes out more than US$1 trillion in market value

For bitcoin, there’s only been one constant recently: decline after decline after decline. And the superlatives have piled up really quickly. With the Federal Reserve intending to withdraw stimulus from ... Read more »

Moneycontrol Pro Weekender | Bubble Trouble 

Representative image Dear Reader, Jeremy Grantham, GMO’s chief investment strategist, has been warning for years about a bubble building up in the markets. In his latest missive, titled ‘Let The ... Read more »

Fed Launches Review of Possible Central Bank Digital Currency Officials solicit public comment, but are unlikely to decide soon whether to issue a government-backed cryptocurrency

“We look forward to engaging with the public, elected representatives, and a broad range of stakeholders as we examine the positives and negatives of a central bank digital currency in ... Read more »

Cryptocurrency Prices Today: Bitcoin falls 7%, Ethereum sheds 9%

(Image: Reuters) The global cryptocurrency market capitalisation dropped from $1.88 to $ 1.7 trillion during the last 24 hours while the trading volume surged from $66.35 to $126 billion. The ... Read more »
On you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic