Buy now, pay later (BNPL) stocks are companies that provide a form of short-term financing. They enable consumers to make an immediate purchase that they pay for over time in installments. BNPL is typically an interest-free source of short-term credit.
Here's a closer look at buy now, pay later financing and the top stocks in the sector that investors should consider.
Understanding buy now, pay later
Buy now, pay later (BNPL) are short-term loans provided by financial technology companies to customers to make purchases from participating retailers that they pay off in installments. Most BNPL loans typically have the following features:
- Fixed payments: The borrower will typically make a small down payment and then make fixed installment payments to pay off the remaining balance, usually over four weeks (i.e., Pay in 4).
- Typically, no fees to the borrower: BNPL loans don't charge borrowers interest or additional fees if the borrower pays the loan over the stated term (usually over four weeks). However, they do charge interest if the borrower opts for an extended payment plan and late fees if they don't make timely payments.
- Merchants pay the fee: BNPL companies make money by charging the merchant a fee called a merchant discount rate to help them complete a transaction. Merchants are willing to pay this fee to facilitate a BNPL transaction because it enables them to increase sales.
While providing BNPL loans can be a lucrative and growing source of income for financial technology companies, they are taking on the risk that the borrower won't repay the loan on time. The default risk would increase during a recession when more people lose their jobs and can't afford to make payments. However, one way some BNPL companies are reducing their default risk is by using artificial intelligence (AI) instead of credit scores in underwriting loans. It is often a better predictor of a borrower's potential to default on the loan.
Best buy now, pay later (BNPL) stocks in 2025
Many financial technology companies (fintech) are getting into buy now, pay later financing. Here's a look at three of the best BNPL stocks this year:
1. Affirm Holdings
NYSE: KLAR
Key Data Points
Klarna (KLAR -4.54%) finally completed its long-awaited initial public offering (IPO) in September 2025. The global financial technology company is a leader in the BNPL sector. As of late 2025, Klarna had about 111 million active customers and more than 790,000 merchants across 26 countries. The company's platform supports $112 billion in GMV.
Klarna makes money through payments and advertising. The company currently has a tiny slice of the $520 billion (and growing) global payment market (0.6% market share). It has an even smaller slice of the $570 billion (and growing) digital advertising market (0.03% market share).
The company is embracing AI to become even more efficient. It's leveraging the technology to enhance its marketing and customer service. While it had some early stumbles and has had to rely on more humans, the company continues to believe in the power of AI to take its business to the next level. AI has helped Klarna become consistently profitable while delivering improved margins.
Should you invest in BNPL stocks?
BNPL stocks have a lot of potential. Some reasons to invest in the sector include:
- BNPL is a rapidly growing form of short-term financing.
- These loans can be very profitable for BNPL lenders.
- BNPL providers can grow their relationships with customers by offering them additional financial services.
However, BNPL has risks, including:
- A recession could cause increased defaults across the sector, affecting growth and profitability and likely weighing on share prices.
- There's a lot of competition in the space.
Investors need to ensure they understand how BNPL works before investing in the sector.
What to look for when investing in BNPL stocks
Investors need to consider a few factors when deciding what BNPL stock to buy, including:
- Size: A larger BNPL company will have more scale, putting it in a stronger position to capture greater market share.
- Business model: Some BNPL companies have more diversified business models, which can enable them to grow faster. Also, some BNPL companies hold most of their loans, while others sell them to third-party investors.
- Profitability: Look for a company with an increasingly profitable BNPL business.
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How to invest in BNPL stocks
Anyone can invest in BNPL stocks. Here's a step-by-step guide on how to add one to your portfolio:
- Open your brokerage app: Log in to your brokerage account where you handle your investments.
- Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
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