The Buy Now, Pay Later Evolution: Navigating 2026 and Beyond
Buy Now, Pay Later (BNPL) has rapidly transformed the retail landscape, offering consumers a flexible payment option and driving significant growth for merchants. But as the market matures, regulatory shifts and evolving consumer behavior are reshaping the future of BNPL. Here’s a look at the key trends retailers and consumers should watch in 2026 and beyond.
BNPL’s Growing Pains: A Look at Current Usage
BNPL divides purchases into smaller installments, typically four payments over six weeks, often interest-free. In 2025, BNPL accounted for 1.5% of all US retail sales, a substantial figure that continues to climb. While Millennials currently represent the largest user base (34.6% in 2025), Gen Z is quickly catching up (30.6% in 2025) and is projected to turn into the dominant generation of BNPL users by 2028. However, usage isn’t limited to younger demographics. parents and those living paycheck to paycheck are also significant adopters, representing 46.7% and 42.7% of users respectively.
The Rise of Card-Linked BNPL and Increased Competition
The BNPL space is becoming increasingly crowded. While providers like Klarna, Affirm, Afterpay (owned by Block), and PayPal Pay Later currently dominate, traditional credit card companies are aggressively entering the market with their own installment plans. American Express’ Plan It, Chase’s Pay Over Time, and Citi’s Flex Play actually swept JD Power’s 2025 BNPL satisfaction ratings, signaling a shift in consumer preference towards familiar financial institutions. PayPal is currently the fastest-growing major player, anticipating $40 billion in volume for 2025.
Regulatory Uncertainty and the CFPB
The regulatory landscape surrounding BNPL is in flux. The Consumer Financial Protection Bureau (CFPB) initially planned to classify BNPL providers as credit card issuers, subjecting them to the same consumer protections. However, the CFPB has since decided to revoke that interpretive rule, leaving BNPL in a state of regulatory limbo. The Financial Technology Association, representing major BNPL players, had previously sued over the original rule. Retailers should anticipate continued uncertainty and monitor state-level developments closely.
Consumer Behavior: Spending, Regret, and the Gen Z Factor
BNPL undeniably encourages spending, with per-user spend surpassing $1,000 in 2024 and projected to reach $1,542.88 by 2028. However, this convenience comes with risks. Nearly half of US BNPL users (49%) have experienced at least one problem with the payment method. Common issues include overspending (25%), missed payments (16%), purchase regret (15%), and difficulties with returns (14%). Gen Z users are particularly prone to these issues, with 66% reporting problems and overspending being their primary concern (30%). Interestingly, only 14% of consumers aged 18-25 prefer paying in installments, with 59% preferring to pay upfront.
How Retailers Can Optimize BNPL Partnerships
To maximize the benefits of BNPL, retailers should carefully evaluate potential partnerships across several key dimensions:
- Reach and Integration: PayPal and Affirm offer the broadest US reach. Mobile wallet integrations (Apple Pay, Google Wallet) are expanding in-store BNPL options.
- Consumer Fit: Align providers with your target demographics. Fintech providers appeal to younger consumers, while card-linked installments resonate with older demographics.
- Fee Structure: BNPL providers typically charge merchants between 2-8% per transaction. Weigh these fees against the potential increase in conversion rates and average order value.
- Brand Alignment: Consider consumer protection concerns and position BNPL as an option, not a default, given the reported issues and Gen Z’s ambivalence.
The Future of BNPL: Maturation and Integration
While payment value growth is decelerating – from 27.1% in 2024 to 19.2% in 2025 and a projected 14.0% in 2026 – BNPL is evolving from a rapid growth driver to a standard payment option. The integration of BNPL data into credit scores, with Affirm currently the only major provider reporting to credit bureaus, will further shape its role in the financial ecosystem.
Did you know?
Black Friday 2025 saw BNPL volume reach $747.5 million in online spending, an 8.9% year-over-year increase.
Pro Tip:
Don’t assume BNPL is a one-size-fits-all solution. Analyze your customer data to determine which BNPL options best align with their preferences and financial habits.
Frequently Asked Questions (FAQ)
- What is BNPL? BNPL allows consumers to split purchases into smaller, interest-free installments.
- Who uses BNPL the most? Millennials and Gen Z are the primary users, but adoption is growing across all demographics.
- Is BNPL regulated? The regulatory landscape is evolving, with recent changes from the CFPB creating some uncertainty.
- Are there risks associated with BNPL? Yes, potential risks include overspending, missed payments, and difficulties with returns.
As BNPL continues to mature, retailers who strategically integrate these options, prioritize consumer protection, and stay informed about regulatory changes will be best positioned to succeed in this evolving landscape.
