Making sense of market moves
Stay up to date on the latest market news with daily analysis of the investing landscape, served up Brew-style.
In the age of Apple Pay and TikTok Shop, it’s easier than ever to buy random things you don’t need. Thanks to buy now, pay later (BNPL) apps, it’s become effortless to buy stuff you can’t necessarily afford, either.
But whether or not it's a smart personal finance move to use these services, the BNPL industry is booming. According to Adobe Analytics, Americans have spent $9.4 billion this holiday season using BNPL platforms—including $991 million on Cyber Monday alone. Shoppers are expected to spend about $18.5 billion in total on BNPL platforms this holiday season, about 11% higher than the $16.6 billion they spent in 2023.
BNPL companies are seeing huge gains as a result. Affirm is up 51.85% year-to-date, while Block, which operates Afterpay, has risen 29.05% in 2024. Klarna, a BNPL giant based out of Sweden, recently filed to go public via IPO—the ultimate sign it’s feeling confident about its prospects.
These platforms are particularly appealing to those with a lower credit score or little credit history—especially younger, Gen Z consumers, who have adopted BNPL spending en masse. BNPL platforms don’t work like credit cards, so a low credit score isn’t a problem—and they don’t usually report payment histories and loans to credit bureaus, which means spending can quickly spiral out of control. The Federal Reserve Bank of New York pointed out that customers spend about 20% more when BNPL is an option.
Buying now is the easy part
These companies come with an inherent risk—borrowers don’t always pay their loans back in time, even if the amount an individual spends on Cyber Monday is far smaller than something like a car loan.
Then again, although the Consumer Financial Protection Bureau has ramped up scrutiny of these companies, the incoming Trump administration is expected to relax rules on BNPL platforms.
Good to know: JPMorgan downgraded BNPL firm LendingClub earlier this week, sending shares down 3.68% in the past five days—though shares are still up over 81% year to date. JPMorgan analysts argued that the name was reaching overvalued territory.
Of the 20 analysts covering Affirm, 10 have a “hold” rating on the stock, while 25 out of 46 analysts have a “buy” rating on Block, according to the WSJ.—LB