Split in four: how BNPL is changing the way consumers pay

Not too long ago, BNPL was just a button you were mostly seeing when checking out on a fashion website. Now it seems it might be reshaping how the world buys things, finding its way into most of our daily purchase habits.

Global BNPL volume hit USD 560.1 billion in GMV in 2025, up 13.7% year-on-year, and is on track to clear USD 700 billion by 2028. Moreover, it now handles 5–6% of all global ecommerce payments, a percentage that may sound modest until you see what it does to merchant conversion rates and consumer spending patterns.

If we were to look around the world, the Asia-Pacific region now owns the biggest cut, at roughly 36% of global revenue. The US follows at 29–32%, then Europe at around 26%. In Europe, Sweden is the outlier, with BNPL accounting for 23–24% of all ecommerce transactions, partly because Klarna was born in Stockholm, and partly because Scandinavian consumers were already wired for digital-first finance before it was trendy.

Shining the light back on the US, it is interesting to see the huge growth in popularity: Americans spent USD 2 billion via BNPL in 2019, but by 2023, that number had reached USD 116.2 billion. Pandemic-driven ecommerce provided the initial push, but sustained growth came from widespread platform integration and a younger consumer base becoming averse to revolving credit.

Unsurprisingly, younger consumers lead adoption, with more than half of all BNPL users being 35 or under. Gen Z and Millennials sit at the core of this, and women hold a slightly larger share than men (20% vs 14%). Age and gender, though, only tell part of the story. Federal Reserve data and independent research confirm that middle- and high-income consumers are active users too, suggesting the product has outgrown its early reputation as a fallback for the financially stretched.

The spending habits reflect the same trend. The dominant use case remains retail, accounting for about 73% of provider revenue. Electronics lead (44% of users), followed by apparel (39%) and home goods. However, BNPL has been pushing into groceries for a while now (25% of users) and travel (10%), which says something about how far the mechanism has drifted from its origins.

Then vs now

When BNPL first gained traction, the pitch was pretty easy to understand: split a big purchase into four payments, pay no interest, skip the credit card application. Klarna built it in Scandinavia, Afterpay scaled it in Australia, and the use case was well-defined: buy something you wanted but didn't want to feel the cost all at once. All this still holds, but the product grew and moved into different territories.

In 2026, BNPL is being used to pay for groceries, utilities, medical bills, and in a growing number of cases, rent. Affirm has partnered with Esusu to pilot instalment loans for rent payments; Flex, Livble, and Qira have built entire products around the same mechanic. The share of households using Flex to split their rent doubled, from 4% to 8%, between January 2024 and early 2025.

The economic context explains the shift, with prices rising, roughly two-thirds of US consumers are still living paycheck to paycheck. When bill due dates do not align with when money hits your bank account, short-term cashflow tools become a necessity.

The provider landscape has grown to meet that demand, and sometimes, even to shape it. Klarna is now a global payments company and Walmart's official BNPL partner in the US. Affirm operates across more than 350,000 merchants and financed over 31.3 million purchases in Q3 2025 alone. Afterpay serves 24 million customers across 348,000 brands. Newer players like Sezzle are carving out space through new features like their social impact credentials.

The move from luxury products to everyday essentials changes the risk profile of BNPL portfolios, the intensity of regulatory scrutiny, and the consumer protection frameworks providers now have to build.

The merchant perspective

For merchants, BNPL is a commercial bet on three numbers: conversion rate, average order value (AOV), and customer acquisition cost.

AOV tends to rise 20–40% after BNPL integration, as the perceived cost of a purchase drops when payments are spread out. Conversion improves because checkout friction disappears since there is no credit application, and no time is spent waiting for approval. More than one in four Americans say they are more likely to complete a purchase when BNPL is available at checkout. On average, BNPL users spend around 6.4% more online than those who do not use it.

What merchants give up to get there is worth understanding, since BNPL transaction fees typically run between 2–8%, averaging 4–6%, higher than the standard card processing fees, which sit at around 2%. Merchants absorb that in exchange for the sales lift and the transfer of credit risk to the provider. For high-AOV categories with strong repeat purchase rates, that trade-off is usually straightforward. For lower-margin retailers, it requires more scrutiny.

The competitive dynamic has shifted in merchants' favour in the past few years, since BNPL providers can now actively promote their merchant partners through shopping apps, newsletters, and affiliate channels. For mid-market retailers looking for incremental customer acquisition, this marketing function might be a factor in which provider they choose.

The regulatory environment, however, adds a layer of complexity that merchants across multiple markets will need to factor in. The EU, UK, and Australia are each moving to bring BNPL under formal consumer credit frameworks, requiring affordability assessments and clearer disclosure. For providers, that means higher compliance costs, which, for merchants, translates into some of those costs flowing downstream through adjusted fee structures. Moreover, it adds new integration requirements around affordability checks at the point of checkout, which, unfortunately, ends up introducing friction into a product that was built to eliminate it.

The consumer perspective

When a consumer splits a USD 400 purchase into four USD 100 payments, something shifts in the mental accounting; consumer psychologists call this 'pain of paying' reduction. Consumers may use BNPL to spread payments (87%) or because it's convenient (82%), but, in the end, it just reframes what a purchase costs. That’s why, as CFPB highlighted in a report, 66% of BNPL users are carrying multiple simultaneous BNPL loans, and 33% are borrowing from more than one provider at a time. Americans who use BNPL typically carry USD 453 more in personal loan balances and USD 871 more in credit card debt than non-users. The idea that BNPL displaces credit card debt rather than adding to it is, at best, only partially supported by the data.

Moreover, a Harris Poll survey conducted for Bloomberg found that 43% of those with outstanding BNPL balances were behind on payments, and 28% had fallen delinquent on other debts as a direct result of BNPL spending, with around 31% of users saying they have lost track of what they owe. And, to come back to the idea stated at the beginning of this article, this is not concentrated at the lower end of the income scale since roughly 42% of households earning more than USD 100,000 annually report being behind or delinquent on BNPL obligations.

Therefore, since these cases are piling up, regulators have taken note. In the UK, FCA oversight takes effect from July 2026, mandating creditworthiness assessments, standardised disclosures, and access to the Financial Ombudsman Service. In the EU, the revised Consumer Credit Directive is being implemented across member states, formally bringing BNPL within regulated credit frameworks. Australia has ended prior exemptions, requiring providers to obtain lending licences and comply with the National Consumer Credit Protection Act. In the US, the picture is more fragmented since the CFPB withdrew its 2024 interpretive rule in 2025, but credit bureau reporting of BNPL activity is expanding, with FICO confirming it will incorporate BNPL payment history into credit scores.

These changes will raise compliance costs and introduce new friction, but they also have the power to make the sector more legitimate. For an industry that scaled rapidly on the back of light-touch regulation, the adjustments will be uncomfortable in places. Affordability assessments, standardised disclosures, and credit bureau reporting change the product's economics and its consumer experience. However, they also align BNPL with the standards applied to every other form of consumer credit, and that alignment is what turns a fintech product into a durable financial institution.

About Claudia Pincovski

Claudia is a News Lead Editor at The Paypers. Holding a bachelor’s degree in Journalism, she is very passionate about exploring the latest news on financial inclusion, financial literacy, digital banking, and Open Finance. Claudia is a diligent researcher, a meticulous editor, and an active advocate for diversity and inclusion.