Why it matters:
- The total value of buy now, pay later (BNPL) transactions is expected to grow 15% in 2025, eMarketer said in a recent report.
- The BNPL model is especially popular among younger consumers.
- BNPL services are increasingly combined with debit card offerings and are tapping data analytics and artificial intelligence to better expand the services they offer—from partnerships with retailers like Costco to integration with mobile wallets—boosting their utility for both merchants and consumers, BNPL executives told CO—.
The leading companies in the buy now, pay later (BNPL) niche are leveraging data analytics and artificial intelligence to expand the services they offer, attracting both consumers and merchants alike.
The BNPL model is especially popular among younger consumers, BNPL providers say.
Three of the leading companies offering BNPL services—Klarna, Affirm, and Afterpay—have all augmented their offerings with new payment platforms as they also add more partnerships with both online and brick-and-mortar retailers.
The major BNPL companies are increasingly offering debit card services that are combined with their pay-over-time platforms. The BNPL providers leverage data analytics to offer payment options tailored to the financial situation of each of their customers, who usually pay in full over the course of a few months.
A recent report from eMarketer found that, although BNPL is a maturing industry and growth is slowing from the explosion in popularity seen in previous years, total BNPL transaction value is still projected to increase by 15% in 2025.
BNPL “remains an important financing tool for consumers and has a long runway ahead,” the report found, citing the leading companies’ partnerships with mobile payment platforms including Google Wallet and Apple Pay as one factor driving ongoing growth.
The report forecasted that the total value of BNPL payments will account for just 1.4% of overall retail sales in 2025, indicating that the platforms may have room to capture a larger share of retail sales. Total transaction values are expected to increase 12.5% next year, 10% in 2027, and 8% in 2028, the report predicted.
The major BNPL companies are increasingly offering debit card services that are combined with their pay-over-time platforms.
Affirm leverages customized payments terms and debit card
Vishal Kapoor, Head of Product at Affirm, said he believes young consumers appreciate the company’s ability to use technology to customize the payment terms for every single transaction.
Affirm’s ability to account for the risk involved in every purchase enables it to maintain low delinquency rates, he said. Affirm evaluates a consumer's ability to repay for each individual purchase by using a proprietary machine learning model that calculates a risk score for the transaction, weighing data such as credit scores and repayment history.
“Our interests are very much aligned with the consumer’s end interest and merchants’ end interest, and we only get paid if the customers pay us back,” he said.
The company in 2021 expanded its offerings to include the Affirm Card, a Visa debit card that allows cardholders to choose whether they want to pay for a purchase immediately or split it into payments. The card is issued as both a physical card and a digital version that users can upload into. Mobile wallets also open up consumers’ ability to more easily pay using Affirm in brick-and-mortar stores, rather than just on e-commerce websites, Kapoor said.
He described the card as a “runaway success” that has surpassed 2.3 million users.
Affirm also continues to expand its retail partnerships, adding a new agreement with Costco Wholesale Corp. that Kapoor said was performing well in its early stages. The company is also expanding internationally, including with e-commerce platforms such as Shopify, Affirm’s largest partner, he said.
As the BNPL platform expands into more brick-and-mortar retail locations, it is also evolving its marketing and promotions to include more in-store displays, Kapoor said. The company works with individual retailers to help them promote offers with special payment terms using Affirm, which can then be promoted in-store using banners and/or QR codes, he explained.
[Read more: How Brands Are Using AI to Optimize Digital Out-of-Home Advertising]
Afterpay evolves with Cash App to grant customers additional alternative payment options
In March, Cash App, a digital wallet offering peer-to-peer payments and a debit card, among other financial services, began offering the BNPL services of its sister brand, Afterpay, under a new brand called Cash App Afterpay. When shopping online with participating merchants, customers can select Afterpay at checkout to pay over time for their purchases.
Cash App has 57 million monthly active customers and 24 million monthly active customers of its Cash App Card debit card. It said that 21% of all consumers aged 18 to 21 used a Cash App Card in 2024.
Like Affirm, Afterpay said that its nuanced data analytics enable it to make highly customized credit decisions for each individual transaction. The company said that relying on data from a major credit bureau alone for Afterpay underwriting approvals would have excluded approximately 13% more customers to maintain the same level of risk.
“When someone shows positive financial patterns—like steady income or consistent repayment—they can see their credit access grow responsibly. This transparency helps build trust and encourages healthy financial behavior,” Afterpay’s parent company, Block, said in a blog post.
[Read more: How Brands Both Big and Small Are Tapping Reddit to Drive Business]
Klarna joins the debit card club
Earlier this year Klarna, which was founded in Sweden in 2005, launched a pilot test of its own debit card, called the Klarna Card.
Like the cards offered by Affirm and Cash App Afterpay, the Klarna Card combines traditional debit card services with the option to pay over time. The company said the new offering is powered by Visa Flexible Credential and issued by WebBank.
The Klarna Card launched a trial phase in the United States this past spring and rolled out nationwide in July. The company recently said that more than 1 million consumers signed up for the card in the first 11 weeks.
In Klarna’s financial prospectus, filed with the Securities and Exchange Commission before its recent initial public offering, Klarna said it has ongoing opportunities for growth, both among consumers and among an expanding roster of merchant partners.
“By partnering with several of the world’s largest [payment service providers], including Worldpay, Stripe and Adyen, we can connect with consumers through hundreds of thousands of merchant checkouts,” the company said.
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