Buy Now, Pay Later Could Become a Multi-Trillion Dollar Business

The market for buy now, pay later (BNPL), an alternative to credit cards whose popularity exploded during the pandemic, could surge to nearly $3.7 trillion by 2030 as more consumers take advantage of ways to pay for goods and services in interest-free installments instead of lump sums.

That’s according to Straits Research, which puts the market at $132 billion now. As of last year, 360 million people around the world used BNPL, a number that could almost triple to 900 million by 2027, according to Juniper Research. While growth projections vary widely, BNPL is expected to record a compound annual growth rate (CAGR) between 20% and 45% through the end of the decade.

The reason: it’s easier and more flexible than credit cards, cheaper at a time when interest rates are rising globally, and the approval process is simpler, according to C+R Research. Even tech giant Apple is getting into the market, launching its Apple Pay Later service in the U.S. this week to give customers six weeks to pay without interest or fees.

Besides customers, the biggest beneficiaries have been providers such as PayPal, Klarna, Sezzle, Affirm, AfterPay, QuadPay, and Future Pay. PayPal Credit dominates the U.S. market with 34.6 million users, four times the number of second-placed Klarna. Affirm and AfterPay, each with about 5.6 million U.S.-based users, and FuturePay, with 3 million, round out the top five. About one in five BNPL users live in the U.S.

PayPal is the preferred service among U.S. consumers, with 57% of BNPL users reporting they've used it. Afterpay (29%), Affirm (28%), Klarna (23%), ZipPay (19%), and QuadPay (15%) round out the top six most popular BNPL providers in the U.S.

Banks and credit card companies, whose funds prop up the credit card market, aren’t expected to notch nearly those growth levels. At $182 billion in the U.S., the credit card market is just $50 billion larger than BNPL.

While North America is the dominant BNPL market, accounting for 30% of global sales, Asia has faster growth prospects due to growing acceptance of electronic payment platforms like PayPal, Amazon Pay, and Google Pay. India is among the markets with the highest potential, with the number of BNPL users expected to reach 116 million by 2027, from 25 million in 2022.

Younger Consumers Lead Adoption of BNPL

Younger consumers in the U.S., particularly Gen Z, use BNPL the most. BNPL usage among Gen Z adults is expected to rise to 47.4% by 2025, up from 36.8% in 2021. For Millennials and Generation X, the corresponding projections are 40.6% and 30.9%, respectively. BNPL usage is lowest among Baby Boomers and older generations, with a projected usage rate of 14.8% by 2025. That’s up from just 6.2% in 2021.