Consumers are increasingly being offered installment plans at checkouts, driven by the popularity of "buy now, pay later" (BNPL) services like Afterpay and Klarna. These services saw a surge during the pandemic due to increased e-commerce and stimulus checks but have since cooled down. Nonetheless, their influence on consumer spending is still significant. BNPL services allow consumers to divide their purchases into several interest-free installments, which many find appealing in an era of high credit card interest rates and inflation. Companies like American Express and Mastercard have launched their own BNPL programs to capture this market. While BNPL usage has declined from its peak, it remains prevalent among younger consumers and parents with strained finances. Larger brands aim to attract higher-income users with their BNPL features, potentially creating a divide between users of mainstream credit cards and standalone BNPL apps. As living costs rise, credit demand is expected to increase, prompting further innovation in lending products.
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