Buy Now, After Payment Plans offer an attractive alternative to consumer credit cards. They allow purchases to be split short-term, usually interest-free.
“Credits are not new. Credit cards are not new for thousands of years. But they have struggled to adapt to consumer needs,” said Michael Linford, AFFIRM’s Chief Operating Officer. “What we’re seeing in the industry right now is that we’re adopting a wide range of credit card alternatives.”
According to Emarketer, an estimated 86.5 million Americans are buying now and paying later loans in 2024, which could increase to 91.5 million in 2025. A recent Lendingtree survey found that at least one time, including 11% who used at least six services, used later services, such as Affirm or Klarna.
“I think it’s pushing up a part of the credit card industry,” said Moshe Orenbuch, senior analyst at TD Cowen. “It was like it was created for people who bought it now, paid later, didn’t want to use a credit card or didn’t have many opens (credits) to buy it with a credit card.”
“All purchases funded through purchases now are purchases that you may pay later on may be funded through a credit card or checking account that you do not currently offer,” said Kevin King, vice president of credit risk and marketing strategy at LexisNexis Risk Solutions. “So it reduces card trading activity, usage and those are the main revenue drivers.”
Beyond the direct challenge of buying now, there are other reasons to be aware of consumers who use these plans, especially as the number of users continues to grow, paying later loans to credit cards, major banks and financial institutions.
“Buy now and paying so far represents a huge black hole in the credit profile and an understanding of the consumer’s credit quality,” King said.
Watch the video above to find out what’s behind the popularity of buying now, pay later loans, and see why traditional lenders, such as banks and credit card companies, are wary of consumers who use these programs.
