More Consumers Turning to Buy Now Pay Later for Holiday Shopping

A recent report by software and market-research company Adobe Analytics found that the number of buy now, pay later (BNPL) purchases rose 68 percent during the week of Black Friday (November 21 through November 27), with revenue from BNPL purchases rising 72 percent week over week.

BNPL products allow consumers to split the cost of purchases into multiple payments with either simple interest or no interest at all.

“In an uncertain economic environment, a more cautious consumer is embracing more flexible ways to manage their budget,” the company said in a separate report, according to MarketWatch.

Experts say that more people living paycheck to paycheck, as well as younger people, are utilizing BNPL along with other nontraditional forms of payment and credit. Nearly half of millennial and Gen Z consumers said they are highly likely to use BNPL, personal loans, or credit cards on holiday purchases, according to a holiday season report from LendingClub.

Over the Thanksgiving weekend, the average order value of BNPL purchases decreased by 9 percent year over year, so consumers are using BNPL to finance lower-priced gifts. BNPL services have increased in usage largely due to growing e-commerce sales and merchant acceptance, as well as growing skepticism among younger consumers about traditional credit products.

With credit cards, merchants pay transaction fees when they accept card payments from consumers, and consumers pay added interest if they carry a balance. In the BNPL model, merchants pay a higher fee since consumers are seldom charged interest. 37 percent of Americans intend to use BNPL services, personal loans, or credit cards during the holiday season, up from 34 percent in 2021.

In September, Director of the Consumer Financial Protection Bureau Rohit Chopra told reporters at a virtual news conference that the agency is “working to ensure that borrowers have similar protections, regardless of whether they use a credit card or a buy now, pay later loan.”