BNPL is having a banner holiday season. But can healthy performance now transform itself into a strong later?

Orders made via buy now, pay later (BNPL) increased 85% over Cyber Five, according to Adobe Analytics. “It’s a win-win for retailers” as it increases basket size and boosts conversion rates, our analyst Grace Broadbent said on the “Behind the Numbers: Reimagining Retail” podcast.

Buy now, why now? Shoppers, especially younger ones, are cash-strapped this holiday season. But after two years of restrictions, many want to spend, even as the cost of goods goes up.

• “We might be seeing a bit of YOLO spending, like you only live once,” said our analyst, Sky Canaves. People want to “make the most of these holidays,” which is pushing them toward BNPL.
• And people can now use BNPL for pretty much anything. What once was mainly a service for fashion and beauty is now available for travel, dining, and entertainment.
• BNPL adoption is increasing across merchants and age groups.

Expect a “holiday hangover” in the first quarter. “There’s going to be a bit more of a reckoning next year,” Canaves said. BNPL users who spent heavily in December will likely be more reserved with spending in the following few months.

But even with a potential post-holiday slump, BNPL is here to stay. “It’s getting into people’s habits, their routines, to pay with this, and we definitely expect those habits to continue on,” said Broadbent.

Gen Z will use BNPL for life, according to Broadbent. “They will also adopt credit cards, but I think it’s going to be a both situation and not an either/or,” which is something our forecast reflects.

• One-third of US internet users will also be BNPL users next year.
• More than half of US internet users ages 18 to 34 will use BNPLs.
• People ages 35 and under make up more than half of all US BNPL users.
• Broadbent said Gen Z’s aversion to debt is pushing young adults away from credit cards and toward BNPLs.

BNPL will change credit card use, not the other way around. “Savvy BNPL users will use credit cards to pay for BNPL purchases. It will spread the purchases out a little further and allow them to gain the rewards of the credit cards,” according to Canaves.

Proceed with caution, because the BNPL landscape is definitely changing.

• Credit cards and payment networks are launching their own BNPL solutions to compete with fintechs, which are not profitable.
• The regulations are coming. Regulators are investigating the dangers BNPLs pose to consumers, who could be racking up multiple debts without realizing.
• People are using BNPLs on things like food, gas, and medical bills they can’t otherwise afford. For many, BNPLs are just a new way to accrue debt.

Key takeaways: BNPL is here to stay, even as the fintechs that invented the service face challenges. That’s good news for retailers, but it’s a risk to consumers. Nonetheless, the BNPL train is already rolling, and come 2026, close to 40% of US internet users will be buying now and paying later.

Listen to the full podcast.

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