BNPL Spending Tops $160 Billion as Use Shifts to Everyday Bills

A checkout button becomes a budget tool

Buy now, pay later started as a way to split the cost of sneakers and gadgets into smaller payments. New research from Federal Reserve economists shows how far it has moved past that. Americans put more than $160 billion of spending on BNPL plans last year. Experts say a growing share of it went to groceries, utility bills, transportation and sometimes rent.12 The classic pay-in-four plan, which splits a purchase into four payments over about six weeks, made up roughly half of that total. Use of these plans has grown almost 80% since 2023, and longer- and shorter-term loans account for the rest.1214

The Associated Press reporting, which local stations republished widely, presents this as a cost-of-living story more than a fintech one. NerdWallet's Sara Rathner pointed to a weak job market and everyday prices that have, in some cases, risen faster than incomes.12 Mark Elliott of Happen Bank, the company formerly known as LendingClub, said BNPL has turned from a convenience into a way of managing cash-flow problems.12 A version translated into Spanish puts the growth down to inflation outpacing household income.11 The coverage agrees on the main point: the product is increasingly being used to pay for things people need, not things they want.

Reconciling the numbers

The $160 billion figure needs some context, because BNPL is notoriously hard to measure. In February, the Richmond Fed built a model on the Consumer Financial Protection Bureau's loan data from the six biggest providers. It estimated 2025 U.S. BNPL transaction value at about $70 billion, or around 1.1% of credit-card purchase volume.27 That estimate covers only pay-in-four lending from Affirm, Afterpay, Klarna, PayPal, Sezzle and Zip.2227

The two figures roughly fit together. If pay-in-four is about half of $160 billion, that implies around $80 billion. That is close to the Richmond Fed's model, with longer-term installment loans making up the difference.1227 The real point is that a broader definition of BNPL, one that includes monthly installment loans that can charge interest, roughly doubles the size of the category. Coverage that talks about BNPL as one product hides how much of the market now looks like traditional consumer lending. Even so, a Richmond Fed analysis found that BNPL is still a small part of U.S. credit compared with cards, and its effect on financial stability has been limited.17

Late, but not defaulting

The most disputed question is whether borrowers are in trouble, and the answer depends on which measure you use. LendingTree's 2026 survey found that 47% of BNPL users paid late in the past year. That figure was 41% in 2025 and 34% in 2024. In the same survey, 54% said they could not make ends meet without these loans.21 Among parents of children under 18, the figure was 62%.21 A quarter of users have carried three or more BNPL loans at once.27

Lender data looks much better. The CFPB's loan-level data showed charge-offs falling to 1.83% of loans in 2023 from 2.63% in 2022. The share of loans charged a late fee fell to 4.1% from 5.2%.23 Industry groups cite these figures as proof that consumers use BNPL responsibly.23 Consumer advocates respond that automatic payments mean lenders get paid even when the payment overdraws a bank account, which pushes the strain somewhere else.23

The gap is not a contradiction. Paying a few days late is different from defaulting, and 72% of late payers in the LendingTree survey said their most recent payment was no more than about a week late.2125 Still, the consumer surveys are worth taking seriously. A product that people describe as essential to getting through the month, and that many of them pay late, is under pressure even if lenders' write-offs stay low. Low charge-offs show that BNPL companies are good at collecting. They do not show that borrowers are doing well.

Affirm and Klarna: same button, different businesses

For the two best-known brands, the growth in spending is clear, but they make money from it in different ways. Affirm's fiscal 2026 gross merchandise volume rose 37% to $50.2 billion.3 Revenue was $4.26 billion and operating income was $147 million.8 Klarna processed $127.9 billion in GMV on $3.5 billion of revenue in 2025. That means Affirm keeps about 8.5% of its volume as revenue, while Klarna keeps about 2.7%.2 Affirm's mix leans toward longer, interest-bearing loans, and it earned more than $2 billion in interest income in fiscal 2026.2 One analyst said the comparison shows that "BNPL" describes how a payment looks at checkout, not how the lender makes money.2

That difference showed up in the stock market this month. A hotter-than-expected inflation report pushed Treasury yields higher, and Affirm shares fell 10% while Klarna dropped 3%.1 The explanation is how each company pays for its loans. Affirm relies on warehouse credit lines and securitizations, which are priced off market rates. Klarna draws most of its funding from cheap consumer deposits and has applied for a U.S. bank charter.1 Affirm's 0% APR loans rose 41% last quarter, which adds to the pressure. When rates rise, merchants, not shoppers, cover the higher financing cost of those promotions.1

Affirm's credit numbers are worth watching, though they are not alarming. Its credit-loss provisions rose to $796.7 million in fiscal 2026 from $616.7 million. Delinquencies of 30 days or more, excluding certain portfolios, rose 19 basis points to 2.5%.3 Its average funding cost fell 103 basis points year over year to 5.8% in the fourth quarter, a trend that higher yields could reverse.3

Klarna's results improved, but investors have not been convinced. Second-quarter revenue rose 27% to $1.042 billion and transaction margin dollars rose 42% to $446 million.10 Credit-loss provisions dropped to 0.52% of GMV.2 Even so, the company cut its full-year GMV guidance to $149 billion–$151 billion, down from more than $155 billion. It blamed currency moves and weaker demand in Germany, while keeping its U.S. volume assumptions unchanged.10 One analyst noted that PayPal has reported strong BNPL growth in Germany, which points to more competition as well as a weaker economy.7 Klarna shares were down about 55% year to date in early October, while Affirm was roughly flat.6

The lesson for investors is that rising consumer BNPL spending does not lift every lender equally. Funding costs and product mix matter as much as volume.

The checkout battle

Where BNPL appears at online checkout is now a contest among lenders, card issuers and wallets. Merchants have added it because it tends to increase conversion and order size, and because the lender takes on the credit risk.20 Exact merchant adoption rates come mostly from secondary surveys and should be treated as rough estimates.27 Klarna has pointed to partnerships with payment service providers and Apple as growth drivers.10 Affirm recently added Crate and Barrel.5

Banks are pushing back. A J.D. Power study found that satisfaction with bank-branded BNPL rose 59 points, while satisfaction with fintech BNPL brands fell 17 points.30 Many card customers set up installment plans after a purchase rather than at checkout, which gives banks room to compete.30 Debit cards are the most common way to repay, used by 64% of fintech BNPL customers.30 That matters because it ties repayment directly to checking-account balances and the overdraft risk advocates warn about.23

A regulatory vacuum

All of this is happening with limited federal oversight. In May 2025, the CFPB withdrew a 2024 interpretive rule that would have treated BNPL like credit cards under the Truth in Lending Act, and it later said it would not issue a replacement.2528 One law review essay argued that this leaves borrowers without standard disclosures or the dispute rights that card users have.26 Credit reporting, the other possible safeguard, is uneven. Affirm and Klarna report to Experian and TransUnion, while Afterpay does not report to any credit bureau.12

The reading

The $160 billion figure is less about fintech success than about stretched household budgets. Lenders have handled credit risk well so far, and the low charge-off rates are real.23 But surveys showing rising late payments, multiple loans at once, and people saying they need BNPL to make ends meet suggest the product is now covering basic shortfalls.2127 With federal rules gone and interest rates moving again, credit is not the main near-term risk. The bigger risks are pressure on lenders' funding costs and pressure on borrowers who are already paying for groceries in installments.112