During the 2025 holiday shopping season spanning from November 1 to December 31, expenditures utilizing "Buy Now, Pay Later" (BNPL) services are forecasted to reach $20.2 billion. This figure represents an 11% increase over last year's seasonal BNPL transactions, indicating sustained growth in consumer adoption. The data, sourced from Adobe Analytics, underscores a trend in which BNPL methods are becoming deeply integrated into the American retail ecosystem.
Looking beyond the holiday period, the utilization of BNPL is expected to rise considerably. Annual BNPL spending is projected to hit $116.7 billion in 2025, effectively doubling figures from 2022 and exceeding 2020's numbers by more than seven-fold. This rapid adoption reflects the growing importance of installment payment options in consumer finance.
A recent survey conducted by PayPal Holdings Inc., a leading BNPL provider, revealed that approximately half of holiday shoppers are inclined to complete purchases through BNPL offerings when available. Michelle Gill, PayPal's General Manager, highlighted that incorporating BNPL payment options can significantly increase average order values—by 91% for large enterprises and 62% for small businesses—demonstrating the value of these services from a merchant perspective.
Despite the commercial benefits and rising usage, there are mounting concerns about the financial implications for consumers. More individuals are turning to BNPL not only for discretionary spending but also for everyday purchases such as groceries, an indicator of underlying economic stress. LendingTree Inc. data revealed that 41% of BNPL users admitted to missing payments, up from 34% in the prior year. Such delinquencies can incur high fees, imposing a substantial burden.
Financial planning professionals emphasize that BNPL arrangements may encourage consumers to make purchases beyond their financial means by fostering an illusion of affordability. Linda Grizely, a Certified Financial Planner, pointed out that integrating BNPL usage into credit scoring models could enhance transparency and promote greater accountability among lenders and borrowers.
The sector's regulatory environment is currently evolving. Notably, conservative commentator Charlie Kirk criticized BNPL services as predatory, warning of long-term financial harm to Generation Z consumers who are increasingly burdened with debt. This viewpoint, expressed shortly before his passing, aligns with efforts by lawmakers to enhance oversight.
Recently, Senator Kirsten Gillibrand introduced the Buy Now, Pay Later Protection Act, aiming to amend the Truth in Lending Act to confer consumer safeguards akin to those for credit card users onto BNPL loans. Complementing legislative initiatives, Connecticut Attorney General William Tong announced a multistate investigation into prominent BNPL providers such as Affirm Holdings Inc., Afterpay (owned by Block Inc.), Klarna Group PLC, PayPal, Sezzle Inc., and Zip Co. Ltd. The inquiry focuses on fees, disclosure practices, repayment terms, and consumer exposure to financial risks, with the Attorney General's office cautioning against "unclear terms, hidden fees, and debt traps" associated with BNPL products.
Legal experts note that BNPL products face a patchwork of regulations. Braden Perry, former CFTC enforcement attorney, remarked that BNPL is subject to inconsistent standards state-to-state—classified variably as loans, installment contracts, or effectively unregulated. This fragmented approach creates confusion for consumers and providers alike, potentially encouraging regulatory arbitrage. Attorney General actions are seen as manifestations of regulatory frustration compounded by legitimate consumer protection issues.
Market sentiment around BNPL companies in 2025 has been uneven. PayPal Holdings Inc. shares have declined by 30.54% year-to-date, Block Inc. by 24.90%, and Klarna Group PLC by 31.67%. Conversely, Affirm Holdings Inc. and Sezzle Inc. have experienced gains of 25.69% and 65.27%, respectively, while Zip Co. Ltd. saw a more modest increase of 7.32%. The Global X FinTech ETF (NASDAQ: FINX), which offers exposure across BNPL providers, has registered a slight loss of 2.06% and exhibits unfavorable momentum across short- through long-term periods, according to Benzinga's Edge Stock Rankings.
None of the BNPL companies named have furnished comments regarding ongoing regulatory inquiries as of this report. Updates will follow should responses be received.