Buy-now-pay-later activity sees healthy growth during the holidays

These micro loans feel more controllable to the consumer - but they may be hard to track

The buy-now-pay-later activity continued apace this holiday season, with installment payments up 14% from a year ago. And the trend will increase further in 2024, according to many experts.

A new concept just two years ago, the BNPL trend is now mainstream. Over the past holiday season, from November 1 to December 31, consumers spent $16.6 billion through BNPL services, according to Adobe Analytics. That’s 14% up year-over-year and an all-time record.

Throughout the whole of 2023, the BNPL volume grew by the same percentage, a 14.3% increase from 2022. Meanwhile, on Cyber Monday alone, BNPL sales surged 42.5% year-over-year to $940 million, Adobe found.

“Consumers want what they want, they want it now, they want to be able to pay for it later,” Jacqueline White, president of payment processing platform i2c, said in a recent Pymnts podcast.

Most BNPL loans work by offering 0% interest on online and in-store purchases to be paid in a number of equal installments over a period from 30 days to several months. However, purchases over a certain amount may come with an APR as high as 36%, and if you miss your payments, a late fee is charged. Some providers charge subscription fees or take a small fee per each payment.

And it’s the predictability and ease of these micro credit options that makes them attractive for consumers. While interest rates have climbed over the past few years, the option to pay out a purchase over several months rather than racking up credit card debt feels less risky and more controllable when there’s an end in sight.

Experts predict the pay-later trend will grow this year, and banks, which have fallen behind the fintechs offering this option, are expected to join in with their advantages of scale and trust.

“In 2024, we’re going to see this emerging technology become more mature and expected,” White told Pymnts. At the same time, she added, BNPL issuers, as they expand from online to in-person sales, should be getting instant access to a consumer’s creditworthiness.

There are currently some alarms going off on the BNPL trend, however, as these micro loans may be hard to track and are not reported to credit reporting agencies.

Among the top-known BNPL providers today are Swedish firm Klarna with U.S. headquarters in Columbus, Affirm in San Francisco, Sezzle in Minneapolis, and Australia’s Afterpay and Zip.

Tech giants are also tapping the market: Apple also has its Apple Pay Later plans for purchases up to $1,000, PayPal has a BNPL option, and Amazon offers to split payments over several months on qualifying products with its credit card. Google Pay is also planning to make its BNPL option available early this year in partnership with the aforementioned Affirm and Zip.

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