Buy Now Pay Later Takes Over Holiday Shopping

During the recent holiday shopping season, buy now, pay later (BNPL) services saw sharp growth as shoppers leaned into online platforms and away from traditional in-person retail. People shifted from quick impulse buys to more calculated purchases, splitting costs into manageable payments without interest. BNPL providers filled this gap, handling a surge in transactions that reflected broader changes in how consumers manage holiday spending.​

This change did not come out of nowhere. Economic pressures like lingering inflation and tighter budgets pushed people to rethink how they spend. Instead of maxing out cards for Black Friday deals or Cyber Monday hauls, many turned to BNPL providers. These services let buyers pay in four interest-free installments over six weeks, making big ticket items feel manageable. Data shows BNPL transaction volumes jumped 40% year over year during the holidays, with online sales accounting for over 70% of the action. ​

Companies like Affirm Holdings, Inc. (NASDAQ: AFRM), Klarna Inc. (NYSE: KLAR), and Afterpay saw massive upticks. Affirm reported a 50% increase in gross merchandise volume for the season, driven by partnerships with retailers like Amazon and Walmart. Klarna handled over $2 billion in U.S. transactions alone during Black Friday week. These platforms integrated seamlessly into checkout flows, often with one-click approvals based on soft credit checks that avoid dinging scores. 

What sparked this surge? First, the decline in in-person retail played a key role. Foot traffic at brick-and-mortar stores dropped 15% from pre-pandemic levels, as e-commerce captured 25% of total holiday sales. Shoppers, especially younger ones aged 18 to 34, preferred the flexibility of BNPL for everything from electronics to apparel. Millennials and Gen Z, who make up 60% of BNPL users, cited avoiding debt traps as a top reason. They used these tools for strategic buying, like spreading out costs for gifts or home upgrades, rather than impulse grabs. 

Tech improvements helped too. Mobile apps and AI-driven approvals made BNPL faster than ever, with approval times under 30 seconds. Retailers jumped on board, offering BNPL to boost conversion rates by 20-30%. Take Target or Best Buy: they promoted these options prominently, turning abandoned carts into completed sales. This created a feedback loop where more usage led to better terms and wider acceptance. ​

Regulators watched closely, but the season passed without major hiccups. The Consumer Financial Protection Bureau noted rising complaints about late fees, yet adoption grew anyway. Banks like JPMorgan Chase even tested their own BNPL features to compete. This mix of convenience, economic smarts, and digital ease explains why BNPL volumes hit record highs, outpacing credit card growth by 3 to 1. ​

Broader implications linger for retailers and lenders. Traditional credit cards lost ground, with BNPL capturing 8% of e-commerce spend. Small businesses benefited from higher average order values, up 45% when BNPL was offered. Yet risks remain, like overextension if users stack multiple plans. Financial advisors urge tracking total obligations to avoid surprises come tax time. 

BNPL providers plan expansions into everyday purchases beyond holidays, signaling a lasting habit shift. Shoppers who tried it this season report higher satisfaction and repeat use. Retailers face pressure to adapt or lose out. As digital wallets evolve, expect BNPL to weave deeper into daily finances, rewarding those who spend thoughtfully.