Credit Risk

What to know about Buy Now, Pay Later

What to know about Buy Now, Pay Later

December 16, 2021 | Sharla Godbehere

Buy Now, Pay Later has continued global growth, with U.S. adoption up sharply over the last two years. The service, which originated from Australia and Europe, has more recently expanded to American soil. 42% of Americans have used some sort of Buy Now, Pay Later (BNPL) service.¹ Consumers are adjusting their shopping habits to conform to the “new digital normal.” As more people shop online, which has increased due to the pandemic, more people have adapted to the payment option digitally. 

With BNPL accelerating it is time to understand this service and what it has to offer. BNPL services bring a multitude of benefits to merchants, consumers, FinTech providers, and the overall U.S. economy. Knowing about current BNPL offers and projections for continued evolution is important to a variety of audiences. 

Buy Now, Pay Later financing defined

There is no formal industry definition for Buy Now, Pay Later. However, below are a few key definition points to help with understanding what this service entails. To start off, BNPL is a point of sale loan. Consumers can buy an item online or in a store, and split up the cost over a few weeks or months with regular installment payments instead of paying for the entire purchase up front. This is a great alternative financing option for many consumers, especially during the holiday season. 

It can also be described as an installment and line of credit with varying durations including APR, interest, minimum payments, payment frequency, and more. Many consumers can qualify for this service by providing basic information including name, address, phone number, and birthday. 

BNPL has many benefits and provides a low cost and simple financial alternative to payday loans. This is a great alternative for many consumers when shopping for large and small purchases. FinTechs have strategically positioned themselves at the point of a consumer’s buying decision. On average with BNPL, merchants see more sales with higher conversion rates and increase in average order value (AOV).²

The flavors of BNPL

In our recent ebook, “A not-so beginner’s guide to Buy Now, Pay Later,” Equifax provides multiple examples of the different types of BNPL services with descriptions on what each service entails, including:

  • Merchant transaction loan fee (pay-in-4)
  • Shopper interest loan
  • Existing credit card addition

Each type of BNPL service above, has its own benefits for merchants and consumers to consider. For lenders seeking to develop a BNPL offer, there are also different options with distinct benefits to consider, including the type of relationship to maintain with merchants. Some BNPL providers pursue relationships directly with merchants while others choose to deal with merchant networks.  Still others offer a BNPL payment option through an existing credit card.

The BNPL users

Buy Now, Pay Later (BNPL) adoption remains in its early stages in the U.S., accounting for about 1.6% or $18 billion of eCommerce transactions in 2020, but projected to grow to 4.5% by 2024. The first Buy Now, Pay Later service was Klarna. Since then, there have been many more BNPL services and mobile payments services including Afterpay, Paypal, and Affirm. Currently, Paypal is the most popular BNPL service in the United States.³ The most common purchase category is electronics, followed by fashion. Since these types of purchases tend to be at a higher price, many consumers may feel the need and desire to use BNPL payment options for these purchases. However, the majority of industries have adapted to some type of Buy Now, Pay Later. 

For many merchants and providers, it is important to understand who your target demographic is for BNPL services. Currently, many young and tech savvy consumers are using this payment service to avoid credit and interest, and to assist with budgeting. Others may have a thin credit file or do not have access to credit. However, these are not the only consumers who use BNPL. BNPL financing programs will continue to grow, even long after the pandemic is over. 

For more information on Buy Now Pay Later and what is to come of this financial service download our ebook, “A not-so beginner’s guide to Buy Now, Pay Later.” Stay tuned for my upcoming blog on what the future holds for Buy Now, Pay Later.


1 Credit Karma Survey
2 The Global Phenomenon of BNPL, BNPL Statistics and User Habits
The Ascent survey of 2,000 American adults, conducted March 10, 2021* PayPal data includes several products, not necessarily just traditional Pay-in-4
Sharla Godbehere

Sharla Godbehere

FinTech Leader

Sharla leads the team focused exclusively on the rapidly evolving FinTech industry. She connects the power of data, technology, and analytics with today's future-designing companies to expedite responsible growth in lending. Sharla assists FinTechs and alternative lenders in leveraging Equifax’s unique data to make bet[...]