Buy now, pay later is no longer a checkout option. It is consumer credit’s default setting. Global BNPL transaction volume reached $576 billion in 2025, according to GlobalData’s 2025 payments forecast. That figure represents a 28% increase over 2024 and places BNPL ahead of personal credit cards in several markets for point-of-sale financing.
How BNPL Went Mainstream
Five years ago, Klarna, Afterpay, and Affirm were marketing to millennials shopping for fashion and electronics. The average BNPL transaction in 2020 was $112, and the product was concentrated in apparel and consumer electronics. By 2025, the product looks different. Average transaction values have risen to $287. BNPL is now used for healthcare bills, grocery purchases, travel bookings, auto repairs, and B2B invoicing.
Klarna reported 93 million active users globally in its 2025 annual report. Affirm processed $28.4 billion in gross merchandise volume in fiscal year 2025. Afterpay, now owned by Block, handled $24.6 billion. In India, LazyPay and Simpl combined process $7.2 billion annually. Brazil’s Mercado Pago embedded BNPL into its marketplace, adding $11 billion in financed volume.
Fintech investment surpassed $210 billion in recent years, and BNPL companies attracted a significant share. Between 2019 and 2024, BNPL startups raised $18.7 billion in equity and debt financing, according to CB Insights.
The Product Has Segmented
BNPL is not one product. It is at least four distinct products under the same label.
The original model is pay-in-four, where a purchase is split into four equal installments over six weeks with no interest. Klarna, Afterpay, and Zip use this structure for transactions under $1,000. The merchant pays a fee of 3% to 6%, and the consumer pays nothing if they pay on time. Late fees apply for missed payments.
The second model is longer-term installment plans, typically 3 to 36 months with interest rates from 0% to 36% APR. Affirm specializes in this segment, offering financing for purchases up to $17,500. Affirm’s average loan term is 11 months, and 43% of its volume carries 0% APR, subsidized by the merchant.
The third model is virtual BNPL cards. Klarna and Zip issue virtual Visa cards that consumers can use at any retailer, not just participating merchants. The consumer selects a BNPL payment plan after the purchase. This model expands BNPL beyond the merchant partnership model.
The fourth model is B2B BNPL. Companies like Billie in Germany and Hokodo in the U.K. offer trade credit terms (30, 60, or 90 days) to business buyers at checkout. Billie processed $4.2 billion in B2B transaction volume in 2025. The global embedded finance market is forecast to reach $7 trillion by 2030, and embedded BNPL for B2B commerce is one of its fastest-growing segments.
Default Rates and the Credit Quality Question
Critics have argued that BNPL encourages overspending and serves borrowers who cannot manage credit. The data is more mixed than the narrative suggests. The Consumer Financial Protection Bureau’s 2024 report on BNPL found that BNPL users were more likely to have bank overdrafts and carry credit card balances than non-users. But the report also found that BNPL default rates averaged 3.2%, compared to 2.6% for credit cards.
Affirm’s charge-off rate was 2.8% in fiscal Q4 2025. Klarna reported a credit loss rate of 0.58% of GMV for 2025, down from 0.72% in 2024. These rates are manageable at current scale, but the industry has not been through a severe recession since reaching mainstream adoption.
Over 300 fintech companies have achieved billion-dollar valuations, and BNPL firms including Klarna, Affirm, and Afterpay are among the most prominent. Klarna’s 2025 IPO valued the company at $67 billion, making it the largest European fintech IPO.
Banks Enter the Market
Traditional banks initially dismissed BNPL as a fringe product. That view shifted. JPMorgan Chase launched My Chase Plan in 2021 and expanded it to cover card purchases retroactively. Citibank offers Citi Flex Pay. Apple launched Apple Pay Later in 2023 and processed an estimated $6 billion in installment volume in 2025.
Over 70% of financial institutions are investing in fintech partnerships, and BNPL integration is a common starting point. Mastercard Installments allows any issuing bank to offer BNPL at checkout through the Mastercard network. Visa Installments provides the same capability for Visa issuers. Both launched globally in 2024.
The bank entry changes the competitive dynamics. Banks have lower cost of capital than fintech lenders. They have existing customer relationships and regulatory licenses. Bankrate analysis found that bank-offered BNPL products charge average APRs of 8.9%, compared to 15.4% for fintech BNPL lenders on comparable installment products.
Regulation Is Catching Up
The U.K. Financial Conduct Authority published its final rules for BNPL regulation in October 2025, requiring affordability assessments, clear disclosures, and complaint-handling procedures. The EU’s Consumer Credit Directive, updated in 2024, classifies BNPL products over 200 euros as consumer credit, subjecting them to full disclosure requirements.
In the United States, the CFPB issued an interpretive rule in 2024 classifying BNPL providers as card issuers under the Truth in Lending Act, requiring them to provide dispute resolution rights and billing statements. Several states have proposed rate caps specific to BNPL products.
Global fintech revenue is expected to grow at a 23% CAGR. BNPL revenue specifically is projected to reach $84 billion by 2028, driven by expansion into healthcare, travel, and B2B categories. The $576 billion in transaction volume processed in 2025 already exceeds what most analysts predicted for 2027 just two years ago.
