As Amazon’s Prime Day kicked off the holiday shopping season this week, U.S. consumers are expected to spend a record $18.5 billion using buy now, pay later for purchases in the last quarter of the year, according to projections by data firm Adobe Analytics.
Buy now, pay later (BNPL) exploded in popularity as the COVID-19 pandemic forced more shoppers online, driving $75 billion in online spending in 2023, up 14.3 per cent from 2022, according to Adobe.
BNPL providers like Affirm and Klarna boost shoppers’ purchasing power by lending them the money for purchases, which they repay in installments spread over as many as 36 months, although the most common products are four-installment payment plans.
Because most BNPL providers do not report their loans to the credit reporting agencies, comprehensive data on BNPL delinquencies is scant. The Financial Technology Association, which counts three BNPL lenders among its members, reports less than a 2 per cent delinquency rate among those companies compared to nearly 9 per cent for credit cards.
Still, 71 per cent of BNPL users also had credit card debt in 2023, according to the Federal Reserve Bank of Boston.
Afterpay – which is owned by Block – reported that 96 per cent of customers paid all of their installments on time during the fourth quarter of 2023, while Klarna reported that 96 per cent of its pay-in-four users in 2023 paid off their bills early or on time.
For the three months ended Sept. 30, 2024, Affirm said 2.4 per cent of its loans were delinquent by more than 30 days.
Here are five charts illustrating how BNPL is used:
SHARE OF ONLINE SPENDING
Consumers spent more than $731.5 billion online from January through September this year, with $57.6 billion of that coming from BNPL purchases, according to Adobe Analytics. That’s up 10.3 per cent from