What: Buy Now, Pay Later (BNPL) apps, initially popular among Gen-Zers and Millennials for making impulse purchases without immediate full payment, are facing challenges as they mature. These include uncertainties about long-term profitability, rising interest rates, and concerns over encouraging unwise debt levels among consumers.

Why it is important: The BNPL sector, which saw a dramatic rise in usage with online shopping's surge during the pandemic, is at a crossroads. With a broadening user base that now includes retirees and those on fixed incomes, and major players like Klarna experiencing significant valuation drops, the future of BNPL services is under scrutiny. The industry's evolution is critical for understanding consumer credit behavior, regulatory responses, and the financial health of the fintech sector.

Buy Now, Pay Later (BNPL) apps, which allow consumers to defer payments through installments, have expanded rapidly since their inception in the early 2010s. Initially targeting younger consumers wary of traditional credit cards, BNPL services like Klarna, Afterpay, and Affirm have broadened their appeal to include a wider demographic, including retirees. However, the sector faces significant challenges, including a massive drop in valuation for companies like Klarna, increased competition, rising interest rates, and growing regulatory and consumer concerns over debt accumulation. Despite these hurdles, BNPL remains a popular payment option, with its use expected to continue growing. The industry's future will likely involve increased regulation, a focus on responsible lending, and possibly a consolidation of players as it seeks sustainable business models.

How ‘buy now, pay later’ apps are changing as they mature