Study: Buy Now, Pay Later Services Continue Explosive Growth
By: Maurie Backman | Updated March 22, 2021
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Buy now, pay later (BNPL) has become a hot topic in the financial world.
Affirm, a BNPL provider, went public in January 2021. They've also announced a forthcoming buy now, pay later debit card. Consumers are shopping more online and seeing new payment options. Income loss and uncertain finances have seen more Americans conserving cash and seeking alternative methods of borrowing money.
In July 2020, The Ascent surveyed 2,000 Americans about their buy now, pay later habits. We followed that survey with another in March 2021, and the results show an almost 50% growth in less than a year.
Here are the rest of the buy now, pay later statistics we uncovered with our polls.
Key findings
- 55.8% of consumers have used a buy now, pay later service, up from 37.65% in July of 2020 -- an increase of almost 50% in less than one year.
- Buy now, pay later usage growth was largest in the 18 to 24 (62% growth) and 55+ (98% growth) age groups between July 2020 and March 2021.
- 53% of respondents who have never used BNPL say they're at least somewhat likely to use it within the next year.
- Among buy now, pay later users who have used the service more since the pandemic started, 41% say they've done so to conserve cash in case of an emergency, while 25% say it's because they lost income.
- 31% of buy now, pay later users have made a late payment or incurred a late fee. 36% of BNPL users say they are at least somewhat likely to make a late payment within the next year.
- 62% of buy now, pay later users think BNPL could replace their credit cards, though only about a quarter want that to happen.
- PayPal's buy now, pay later services are the most commonly used among providers, with 43% of users saying they've used the brand's BNPL options.
- The most common reason to use buy now, pay later services is to make purchases that don't fit in one's budget -- 45% of respondents have used it for this reason.
- Buying electronics is the most common use of buy now, pay later, with 48% of users saying they've used it for that reason.
- 36% of buy now, pay later users use BNPL once a month or more.
- Buy now, pay later users aged 18 to 24 are the most likely to pay $250 or more per month when they have a BNPL payment.
- Americans understand BNPL significantly better than they did last year, with a nearly 50% increase in the number of people who say they understand it at least somewhat well.
- 61% of buy now, pay later users would rather use a BNPL service offered directly from the retailer they're buying from than going through a third party.
56% of Americans have used a buy now, pay later service
In July of 2020, we found that 37.65% of American adults had used a BNPL service. Since then, that number has jumped substantially, with 55.80% of Americans now saying they've used one of these services. That's an increase of 48% in less than a year.
Here's how BNPL usage breaks down by age:
| Age range | Percentage who had used a buy now, pay later service in July 2020 | Percentage of consumers who have used a buy now, pay later service in March 2021 | Percentage growth, July 2020 to March 2021 |
|---|---|---|---|
| 18–24 | 37.71% | 61.16% | 62% growth |
| 25–34 | 46.77% | 60.08% | 28% growth |
| 35–44 | 50.13% | 60.58% | 21% growth |
| 45–54 | 42.22% | 53.07% | 26% growth |
| Over 54 | 20.63% | 40.88% | 98% growth |
Data source: The Ascent surveys of American adults, July 2020 and March 2021.
In July 2020, only 37.71% of consumers aged 18 to 24 had used a buy now, pay later service, but that figure jumped to 61.16% in 2021, showing 62% growth in less than a year.
Users aged 25–54 saw growth of over 20% in the same period. Respondents aged 55 and up showed a staggering 98% growth, but still see significantly less use of BNPL services than other age groups, with only 41% of these consumers reporting having used one.
These findings align with recent research from PYMNTS, which shows that younger consumers are looking for flexible yet responsible ways to pay for purchases.
Men are also more likely than females to use a BNPL service, with 62.20% of male consumers taking advantage of this payment option compared to 51.36% of women.
Over half of non-users are likely to use buy now, pay later in the next 12 months
You may have noticed that 44.2% of our survey respondents have not used a BNPL service. But that doesn't mean they aren't open to it.
- 7.01% of people who have never used buy now, pay later are very likely to use a BNPL service in the next six months
- 10.63% are somewhat likely to use BNPL in the next six months
- 29.30% are neutral or unsure
- 22.96% are somewhat unlikely to use a BNPL service in the next six months
- 30.09% are very unlikely to use BNPL in the next six months
That means 53.09% of people who have never used buy now, pay later are at least somewhat likely to use it in the next year.
So what's holding people back from BNPL? Here's what people who haven't used one of these services said:
- 44.68% say they can use cash or a debit card instead
- 27.15% say they can fall back on credit cards
- 10.86% are hesitant to use buy now, pay later because they don't understand how it works
- 10.29% have never heard of buy now, pay later
- 7.01% have another reason
Will Affirm's debit card that offers buy now, pay later sway the 45% who say they just pay with cash or a debit card? We'll have to see.
64% of buy now, pay later users have used it more since the beginning of the pandemic
The coronavirus outbreak has wreaked havoc on a lot of people's finances. It's not surprising, then, to see that 64.43% of buy now, pay later users have used these services more since the pandemic began.
We asked buy now, pay later users who have used these services more since the beginning of the pandemic what was behind their increased usage. Here's what they said:
- To conserve cash in case of an emergency: 41.31%
- I've been shopping more: 30.04%
- I lost income and needed a way to make purchases: 24.62%
- Other: 4.03%
With significant income losses and a lot of uncertainty around the country due to COVID-19, it's unsurprising that so many people have turned to buy now, pay later to help them through the tough times.
Is it worth using BNPL to conserve cash in case of an emergency or because you've lost income? It often is -- as long as you can make the payments and not incur any late fees. However, "I've been shopping more" isn't a great reason to incur more debt. As we'll see, not everyone agrees that buy now, pay later is a form of debt -- which is problematic in its own way.
Almost a third of buy now, pay later users have made a late payment or incurred a late fee
Like credit cards, failing to make BNPL payments on time results in late fees. Among our respondents, 31.36% say they've made a late payment on a BNPL agreement or incurred a late fee. Consumers aged 18 to 24 are the most likely to land in this boat, with 47.45% being late and/or getting slapped with a fee.
Mistakes happen, so it's not shocking to learn that almost a third of BNPL users have been late with a payment.
What is troubling, however, is that 18.91% of consumers say they're very likely to be late with a BNPL payment over the next 12 months, while 17.47% say they're somewhat likely to be late within the year. That means 36.38% of buy now, pay later users think there's a chance they'll make a late payment within the next year -- a late payment that may have more consequences than people realize, as we'll see momentarily.
Only 30.91% of consumers say they're very unlikely to be late, while 17.74% say they're somewhat unlikely to be late.
Consumers aged 54 and older are less likely to be late with a BNPL payment than any other age group, with 62.84% of these buy now, pay later users saying they're "somewhat" or "very" unlikely to make a late payment in the next year.
Respondents aged 18–24 were the most likely to say they'd probably make a late payment within the next year -- 43.80% said they were "somewhat" or "very" likely to make a late payment in the coming 12 months.
Understanding interest and late fees in buy now, pay later services
Most buy now, pay later services advertise 0% interest -- but that can be a bit misleading. If you make a late payment, you'll incur at least a late fee. And you may have to pay a finance fee, too.
Here are the interest rates and late fees we dug up from buy now, pay later services' terms and conditions:
| BNPL service | Interest rate | Late fees |
|---|---|---|
| Affirm | Up to 30% "depending on your creditworthiness and/or the type of product offered (0% APR may only be offered at select merchants)" | None |
| Afterpay | 0% | Up to $17 per late payment, capped at up to 25% of your initial order value or $68, whichever is less (per purchase) |
| FuturePay | $1.50 for every $50 in unpaid balance* | Up to $38 (per payment) |
| Klarna Pay Later in 4 | 0% | Up to $7 (per payment) |
| PayPal Pay in 4 | 0% | Unlisted on website, may vary between states |
| QuadPay | 0% | Up to $21 per purchase |
| Sezzle | 0% | $10 per payment |
| Splitit | 0% | None (though your credit card will charge late fees) |
*While FuturePay's $1.50 per $50 is technically a finance fee, we felt it fit better in the interest rate column. Data source: terms and conditions pages of BNPL providers.
Keep in mind that these providers may offer multiple programs with different terms, and some terms may change depending on the amount of the purchase and the state it's made in.
The promise of making purchases with no interest makes it seem like buy now, pay later is the clear winner over traditional credit. But is BNPL really better than a credit card?
The answer is complicated and largely depends on what consumers are looking for. For example, using a buy now, pay later service can't help your credit score, but it can hurt it.
Here are a number of factors that American consumers should take into account when deciding between the two:
| Buy now, pay later | Credit cards | |
|---|---|---|
| Average interest rate | 0% | 15.78% |
| Typical late fee | $20–$30 per payment | $28 for first late payment, $39 for subsequent late payments (CFPB) |
| Typical repayment period | 6 weeks to 12 months | One month to repay without interest, up to 24 months with an introductory 0% APR card |
| Typical frequency of payments | Every two weeks to once a month | Once a month |
| Reports to credit bureaus | Late payments (reduces credit score) | On-time and late payments (may improve or reduce credit score) |
| Credit checks | Not usually | Always |
Note that these are typical figures, and not set in stone, especially for buy now, pay later programs, which vary a great deal.
If consumers are looking to improve their credit score or have more flexibility in their repayment period, a credit card with a 0% introductory APR may be a better option. Many credit cards provide perks like credit monitoring, purchase protection, and rewards programs that BNPL providers don't yet offer, as well.
It's also worth pointing out that buy now, pay later programs don't have the same regulatory oversight as credit cards. According to Consumer Reports, some BNPL users have had trouble with disputes and returns, for example.
62% of buy now, pay later users think it could replace their credit cards
Buy now, pay later services function much like a credit card, but they have some distinct advantages like 0% interest and no credit check (usually, anyway).
As such, 27.42% of consumers agree that BNPL services could eventually take the place of their credit cards and would like for that to happen.
Meanwhile, 34.95% say BNPL services could replace their credit cards in theory, but they'll probably keep using their cards anyway. And 37.63% say BNPL services can't replace their credit cards.
Interestingly, at this point, among those who use a BNPL service, 43.73% do so more often than they use credit cards.
And while consumers aged 54 and over are the least likely of any group to use BNPL services in the first place, users of that age group are the most likely to rely on BNPL more frequently than their credit cards.
Should buy now, pay later replace consumers' credit cards?
Everyone has their own needs when it comes to financial products. But many of the benefits that buy now, pay later offers are also available from top-tier credit cards.
In addition to things like a 0% introductory APR, credit card owners often have access to credit perks, purchase protections, travel benefits, and more. Plus they help users build credit, which buy now, pay later programs don't.
Of course, if a consumer isn't able to get approved for a credit card, a buy now, pay later plan may be their only option if they can't save up enough cash for a purchase. And many people just don't like to use credit cards, in which case they need an alternate form of credit, like BNPL.
Over 40% of buy now, pay later users have used PayPal's BNPL services
We asked all of the respondents who had used buy now, pay later which services they had used. Here are the percentage who have used each of the following services:
Note: Bill Me Later was an independent company until it was acquired by PayPal. It is now part of PayPal Credit. Pay in 4 is separate from PayPal credit, and is PayPal's most prototypical BNPL product. PayPal Credit, however, offers interest-free financing on some purchases, so we've grouped them all together.
45% of buy now, pay later users use it to make purchases that don't fit in their budget
BNPL services give consumers more flexibility in how they pay for purchases and help manage cash flow. But people use these services for many reasons.
We asked our survey respondents why they use buy now, pay later, and here's what they had to say:
| Reason for using BNPL service | Percentage of respondents who use BNPL for this reason |
|---|---|
| To make purchases that otherwise wouldn't fit in my budget | 44.98% |
| To avoid paying credit card interest | 36.92% |
| To borrow money without a credit check | 24.73% |
| To safeguard personal data | 20.79% |
| I don't like to use credit cards | 19.18% |
| My credit cards are maxed out | 17.20% |
| I can't get approved for a credit card | 14.16% |
| I don't have bank accounts | 7.71% |
| Some other reason | 5.73% |
Data source: The Ascent survey of 2,000 American adults, conducted March 10, 2021.
The fact that 45% of people use BNPL services to buy things that don't fit into their budgets is a bit worrisome. As is the 17% of people using buy now, pay later because their credit cards are maxed out.
Using buy now, pay later responsibly can be a useful way to bridge the gap between paychecks or keep credit card debt low. But not fully understanding how these services work can make this form of debt dangerous -- we'll discuss that below.
Interestingly, only 72.31% of our respondents agreed that buy now, pay later is a form of debt.
Electronics remain the most popular use of buy now, pay later
Because BNPL is becoming more widely available to consumers, they're able to use these services for a host of purchases. The most common ones include:
- Electronics: 47.67%
- Clothing and fashion items: 40.68%
- Furniture or appliances: 38.89%
- Household essentials: 32.89%
- Groceries: 23.75%
- Books, movies, music, or games: 23.30%
- Other: 9.32%
Based on this, it's pretty clear that buy now, pay later services aren't just for leisure spending. Rather, they play a big role in helping consumers cover their basic expenses -- things like food and household items.
That's a better use of BNPL than buying the latest iPhone or new clothes. While these are sometimes indeed necessary, it's a much better idea to save up for unnecessary purchases and pay for them in cash instead of incurring debt.
36% of buy now, pay later users use it once a month or more
Many people swipe a credit card on a daily basis. How does BNPL compare? Here's what our survey respondents had to say:
| Frequency of buy now, pay later use | Percentage of BNPL users in July 2020 | Percentage of BNPL users in March 2021 |
|---|---|---|
| Once a year or less | 27.67% | 24.73% |
| Once every six months | 21.11% | 18.71% |
| Once every three months | 21.26% | 19.44% |
| Once a month | 18.26% | 18.46% |
| Once a week | 7.85% | 8.78% |
| More than once a week | 3.85% | 8.87% |
Data source: The Ascent surveys of American adults, July 2020 and March 2021.
Interestingly, consumers aged 45 to 54 are the most likely to say they use a BNPL service more than once a week. It could be that consumers in this age bracket earn more than their younger counterparts, and so they're more comfortable making purchases they can pay off over time.
Furthermore, roughly twice as many male consumers use a BNPL service more than once a week compared to female consumers (12.16% versus 6.11%).
Most buy now, pay later users have a single payment per month
Since only about one-third of consumers use BNPL services once a month or more frequently, most aren't juggling an unhealthy number of monthly payments. But still, 9.32% of consumers say they make five or more BNPL payments in an average month.
By contrast, 20.97% of buy now, pay later users make zero payments in an average month, 25.18% make one, and 20.07% make two.
Meanwhile, there's a wide range of monthly payments consumers are taking on. Here's how they break down among our survey respondents:
| Average Monthly BNPL Payment | Percentage of Respondents Who Spend This Much on a Monthly Basis |
|---|---|
| $50 or less | 24.82% |
| $51 to $100 | 23.92% |
| $101 to $250 | 20.43% |
| $251 to $500 | 15.14% |
| $501 to $1,000 | 8.6% |
| Over $1,000 | 7.08% |
Data source: The Ascent survey of 2,000 American adults, conducted March 10, 2021.
Consumers aged 18 to 24 are the most likely to be grappling with monthly payments over $250 -- 37.96% of our respondents in this age group reported these payments.
While it's not necessarily bad to have a large buy now, pay later payment each month -- it depends entirely on your budget and how you're using it -- users under the age of 24 are probably earning the least amount of money. That $250 they're putting towards BNPL payments could put them in a difficult financial situation.
27% of buy now, pay later users heard about it on social media
Because BNPL is a newer concept than credit cards, fewer people know about it. Among those who have heard of BNPL, here are their sources:
- Social media: 26.61%
- Digital store: 20.25%
- Advertisement: 18.91%
- Friend or family member: 17.65%
- BNPL payment provider: 8.51%
- Brick-and-mortar store: 5.82%
- Other: 2.24%
Interestingly, BNPL services are gaining traction in the corporate world, too, with executives now talking about it more than ever before.
Not surprisingly, consumers under 54 are two-thirds more likely to have heard about BNPL via social media than those over 54 (28.10% and 16.89%, respectively).
Consumers over 54 are most likely to learn about BNPL through a family member or friend (29.05%).
How well do consumers understand BNPL services?
The concept behind BNPL is pretty clear -- agree to the terms of your provider's agreement, purchase your items, and make your payments as per the schedule you've signed up for. If you stick to that plan, you're golden. If you don't make your payments on time, you'll risk interest and fees.
But despite the fairly straightforward nature of BNPL services, many Americans don't feel that they understand the terms and conditions of buy now, pay later programs:
- 10.50% give themselves a 1 (they don't understand BNPL at all)
- 9.25% give themselves a 2
- 23.90% give themselves a 3
- 26% give themselves a 4
- 30.35% give themselves a 5 (they understand BNPL services very well)
This indicates a significant boost in understanding since we asked people if they understood how buy now, pay later works in July 2020:
Not surprisingly, consumers who have used a BNPL service are more likely to say they fully understand how these programs work.
Similarly, those who haven't used BNPL are far more likely to say they don't understand these programs at all (19.57% of non-users compared to 3.32% of users).
It's also worth noting that despite BNPL services being the least popular among consumers aged 54 and older, this age group is the most likely to say they understand the terms and conditions involved very well.
| 18 to 24 | 25 to 34 | 35 to 44 | 45 to 54 | Over 54 | |
|---|---|---|---|---|---|
|
1 - I don't understand the terms and conditions at all |
12.50% | 8.85% | 9.21% | 9.39% | 14.64% |
| 2 | 11.16% | 10.29% | 8.56% | 7.44% | 9.39% |
| 3 | 20.98% | 27.78% | 25.20% | 19.74% | 21.82% |
| 4 | 27.23% | 26.54% | 25.53% | 31.07% | 20.99% |
|
5 - I understand the terms and conditions very well |
28.13% | 26.54% | 31.50% | 32.36% | 33.15% |
Data source: The Ascent survey of 2,000 American adults, conducted March 10, 2021.
We're very happy to see that people have a better grasp of how buy now, pay later works in 2021. Though we'd love to see a 0% in the "I don't understand it at all" column, the fact that only 3% of BNPL users don't understand the terms at all is actually pretty good.
30% of buy now, pay later users trust BNPL providers more than credit card companies when it comes to fair business practices
There's a lot of mistrust out there when it comes to credit card companies. But do people feel the same way about BNPL providers?
Among users of buy now, pay later services, there was a fairly even split when it came to trusting buy now, pay later services and credit card companies with personal data.
46.68% of respondents said that they trusted both equally with their personal information, and the rest were evenly split between "buy now, pay later companies are more trustworthy" and "credit card companies are more trustworthy."
Buy now, pay later users showed a different pattern when asked about fair business practices, though:
- 13.08% trust BNPL providers a lot more than credit card companies when it comes to fair business practices
- 17.56% trust BNPL providers more than credit card companies
- 43.82% trust BNPL providers and credit card companies equally
- 15.68% trust credit card companies more than BNPL providers
- 9.86% trust credit card companies a lot more than BNPL providers
30.64% of American consumers who have used a buy now, pay later service trust those services more than credit card companies when it comes to fair business practices. Only 25.54% said credit card providers were more trustworthy in business.
The traditional banking sector has gotten some bad press over the past few years, which may have led to this drop in trust. The same drop wasn't reflected in consumers' feelings about their personal data, though, which was the subject of much of that bad press.
61% of buy now, pay later users would rather use a BNPL service directly from a retailer
With buy now, pay later rising in popularity, it's not hard to imagine retailers like Amazon and Walmart offering their own BNPL services instead of partnering with third-party providers.
How do consumers feel about this?
61% would rather use a BNPL service directly from the retailer they're buying from instead of going through a third-party provider.
Buy now, pay later usage is rising fast
With a near-50% growth in the number of survey respondents who have used a buy now, pay later service, it's clear that BNPL is a quickly growing trend in the U.S. The COVID-19 pandemic has surely played a part in that, with 64% of buy now, pay later users saying that they've used it more since the pandemic started.
And with over half of non-users saying they're likely to use buy now, pay later within the next year, it's almost certain that this explosive growth will continue.
But the fact that almost a third of users have made a late payment and many see themselves doing so in the next year is worrying. As is the fact that 45% of users have used BNPL to make purchases that don't fit in their budget.
Will we see buy now, pay later start to replace people's credit cards? Will the difference in trust between credit card companies and BNPL providers increase? Will common purchases start to include things like groceries, personal care items, and other things outside of electronics and fashion?
This field is growing quickly and changing fast -- so we'll be sure to keep an eye on it and report back.
Methodology
The Ascent distributed this survey via Pollfish to 2,000 American adults ages 18 and over on March 10th, 2020.
Respondents were 59% female and 41% male. Age breakdown was approximately 11% 18–24, 24% 25–34, 31% 35–44, 15% 45–54, and 18% over 54.
Some percentages may not total to 100% due to rounding.
Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team. The Motley Fool has a Disclosure Policy. The Author and/or The Motley Fool may have an interest in companies mentioned.
