A form of consumer credit that lets people pay for purchases in instalments. According to Worldpay, a payments firm, BNPL accounted for $342bn in spending around the world in 2024, up from just over $2bn a decade earlier. Borrowers tend to be younger and less creditworthy than average: fewer than 2% of Bank of America customers born before 1965 have an outstanding BNPL payment, compared with 10% of the bank's millennial and Generation Z clients.
When a customer buys a product for $100, the BNPL lender--perhaps Klarna, a Swedish company, or Affirm, a large American provider--pays the merchant upfront, in exchange for a cut of, say, $3. The customer pays back the sum over time, often six weeks, in four instalments and with zero interest. Customers with access to BNPL loans spend at least 20% more than those without, even as the sticker price stays the same.
In countries where BNPL has been around longer, it contributes to more sales: over one in five of those made online in Sweden, against less than one in sixteen in America. Local and regional firms are popping up to offer the service: Addi in Colombia, Atome in Singapore, Tamara in Saudi Arabia.
The borders between BNPL and mainstream finance are blurring. Klarna has been a bank in Europe since 2017. Affirm launched a debit card and now reports almost 2m cardholders; customers can use the cards in shops, either to pay in full or in instalments. Both BNPL giants have been integrated into Apple's and Google's digital wallets. PayPal began offering BNPL services in 2020 and processed $33bn in BNPL spending in 2024, growing at about 20% a year. Several banks now allow customers to split larger payments into smaller chunks after purchases.
Several startups hope to disrupt trade credit, a vast market in which suppliers lend money to firms that buy their products. American companies alone report about $4.9trn in trade payables--about four times the size of the $1.2trn in balances on American credit cards. The market is antiquated: suppliers doing the lending must manually assess each client's creditworthiness. When small companies gain access to B2B BNPL, shopping baskets grow by around 40% on average, according to Hokodo, a startup in the space.
Portfolios of BNPL debt are increasingly securitised and bought up by asset managers. Elliott Advisors, a British affiliate of a mammoth hedge fund, purchased Klarna's $39bn British loan portfolio. In 2023 KKR, a private-markets giant, agreed to buy as much as $44bn in BNPL debt from PayPal. Affirm has issued around $12bn in asset-backed securities.
Despite the lower credit scores of typical users, BNPL loans had a default rate of 2% from 2019 to 2022, against 10% for credit-card debt held by similar borrowers, according to the Consumer Financial Protection Bureau (CFPB). The share of BNPL users who have made a late payment climbed from 15% in 2021 to 24% in 2024, according to research by the Federal Reserve. Research by the CFPB finds that measures of financial distress--such as revolving debt on credit cards--do not rise after BNPL use, nor are BNPL users more likely to borrow from other sources in the 18 months after agreeing to pay in instalments.
BNPL providers have generally not supplied comprehensive data to credit-reporting firms on their users' borrowing and repayments. Although providers benefit from checking their customers' credit, they deny other lenders the opportunity to do the same--raising the possibility that banks will lend to people with hefty BNPL debts without realising they are riskier than they appear. Affirm, one of America's largest BNPL lenders, has begun reporting its data to credit bureaux. Some providers say they do not trust credit bureaux to understand this new form of finance; others may see opacity as an advantage, because it attracts borrowers who wish to keep their debts hidden.
In June 2025 FICO, America's main provider of consumer-credit scores, announced it would begin providing scores based on borrowers' BNPL histories. A year-long study with data from Affirm found that for the most frequent borrowers, credit scores were improved or unchanged when BNPL loans are included. Research in Scandinavia finds similarly positive results: clients with a history of BNPL use and a strong repayment history were able to borrow at an average interest rate of 1.4 percentage points below the level suggested by their credit ratings.
In 1856 Isaac Singer and Edward Clark, an entrepreneurial duo, began selling sewing machines in instalments. A century ago retailers selling furniture and cars realised they could reach more customers by accepting payments in instalments. "Beware of the slimy coils of the instalment evil," blared one advert in the Houston Chronicle in 1926. When in 1958 Bank of America started posting credit cards to customers, opponents worried about the consequences. After an early spate of fraud, Bank of America's credit-card business went on to transform payments; it is better known by the name it took when it was spun out in the 1970s: Visa.
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