Regulation May Loom, But For Now BNPL Is Enjoying a Growth Blowout

It may have attracted the attention of federal regulators, but the buy now, pay later trend is poised for further strong growth driven by easier-to-use apps, the entry of major new players like Apple Inc., and expansion into new retail markets, according to a report issued early Wednesday.

U.S. purchase volume on BNPL platforms will reach $75.6 billion this year, up 77% from 2021, according to the report from New York City-based Insider Intelligence. But while growth rates will slow as the numbers get bigger, that volume will approach $95 billion in 2023 and will hit $112 billion in 2024, forecasts the report.

Rising user counts have much to do with the trend. The number of U.S. users will total 79 million this year, up 56% from 2021. Indeed, Insider Intelligence forecasts more than 25% of the U.S. population will use a BNPL platform in 2022. “As major retailers like Target and Amazon embrace BNPL, acceptance is becoming more universal—both online and in-store,” Jaime Toplin, a senior analyst at Insider Intelligence, says in a statement.

Apple Inc.’s decision last week to enter the market with Apple Pay Later can’t be overestimated as a growth driver, Toplin adds. The service, set to launch in September, “could surge use by making BNPL readily available to millions of users on a platform native to the devices they use every day,” he says. “This access and ease of use create strong competition for existing titans.” Rivals are likely to respond, he forecasts, by beefing up loyalty programs before the launch, though one factor that could hamper usage of Apple Pay Later is its $1,000 borrowing limit, Toplin adds.

Also, Apple isn’t the only provider leveraging ease of use. Klarna AB, which leads the U.S. market with 34.8 million users, according to Insider Intelligence, and Affirm Inc., with 14 million, “are doubling down on apps that make it easier for customers to use BNPL,” Toplin says. The report does not rank BNPL apps from PayPal Holdings Inc. and Zip. At the same time, markets like domestic and international travel have expanded the fields in which BNPL providers can operate, the report says.

Regulatory agencies, however, could cast a shadow over this sunny forecast, as the Insider Intelligence report acknowledges. The Consumer Financial Protection Bureau in particular has been active in demanding information from leading firms and in issuing cautions to consumers. This activity, Toplin says, “could signal rule-making on the horizon.” Any such rulemaking, he adds, could have a double-edged effect, on the one hand dampening growth and raising costs but on the other hand increasing trust in the product among consumers.