This report will detail the current state of this rapidly growing alternative to traditional credit. “Defining The New BNPL Consumer” also provides insight as to how BNPL will develop in the future. PYMNTS Intelligence uncovered fresh evidence around BNPL users’ demographics as well as spending patterns to surface these findings.
In short: Our report found that heavy usage of BNPL plans for everyday essentials is contributing to its emergence as a financial management tool. Despite its rapid growth, there is still plenty of runway for BNPL’s future as a consumer-focused (and eventually a business-focused) tool.
Readers can expect to learn the importance of financial management and cash flow in consumer attitudes toward BNPL, the product categories shoppers use it for and why, surprising results about the customer segments that are the most prolific BNPL users and more.
Before we detail our key findings, a bit of background and definition of terms is called for. There are four general categories of BNPL providers, including consumer-facing solution providers, white-label providers and tech enablers, traditional credit-based installment plans and neobanks and challenger banks that offer their own brand of installments. This report will focus on consumer-facing BNPL providers such as Affirm, PayPal, Klarna and Sezzle.
Key Findings Overview
The most common reason consumers use BNPL is to manage their cash flow. Nearly two-thirds of users cite cash flow management as an important reason they chose BNPL.
Consumers under the age of 44 are its most avid users. Forty-six percent of Generation Z and 47% of millennials have used BNPL in the past 12 months. Additionally, consumers were likelier to have used BNPL more often for their most recent online transaction (1.5%) than their most recent offline transaction (0.2%).
Overall, 78% of BNPL users report high satisfaction with BNPL services. This satisfaction reflects their widespread acceptance and positive reception. This shift in preference to more flexible and manageable payment options underscores BNPL’s growing importance in consumer finance.
The Psychology of the BNPL Consumer
When it first appeared on the scene as a standalone financial services category, BNPL was generally touted as a way for lower-income consumers or consumers having low credit scores to access installment payments. And, the thought was, consumers could do this with BNPL companies without a rigorous credit check.
In today’s reality, our research shows that consumers use BNPL primarily for two reasons: managing cash flow and accessing credit. For the group of consumers our report calls “necessity users,” who often have lower incomes and limited access to traditional credit, BNPL offers a way to make essential purchases like clothing and groceries on a limited budget. “Choice users” have higher incomes and use BNPL as a strategic tool to optimize cash flow and manage payment for larger purchases. Additionally, choice users tend to spend more on average using BNPL ($777) than necessity users ($576).
Taken as a whole, we split BNPL user answers to our questionnaire by “most important” and “selected [as important] but not the most important.” It is interesting that among the most important reasons consumers use BNPL is to manage spend on large purchases, detailed later in this report.
BNPL vs. the field
PYMNTS Intelligence data also compared BNPL plans to other payment methods. Consumers use general-purpose credit card-linked installment plans to cover the largest average purchase amount at $2,095. Installment plans using store cards follow at $1,521. The average transaction for BNPL is $926. While consumers largely reserve credit card-linked installments for big-ticket items, averages suggest they use BNPL for smaller splurges.
However, BNPL still does well with consumers spending over $1,000 in certain categories. For example, for travel and leisure purchases that large, 9.1% of consumers used BNPL, leading other installment options. Likewise, of the products that consumers split into installments using BNPL and cost more than $1,000, 29% were in home furnishings and appliances. Overall, BNPL leads other installment types in 5 of 13 product categories.
Consumers appreciate BNPL for its convenience. Forty-three percent of users cited its ease of use as the most common reason they chose BNPL in the last 12 months. Likewise, a quarter of BNPL users appreciate its flexible repayment terms. These trends underscore BNPL’s role in providing flexible financial solutions to diverse consumer segments.
The Profile of the BNPL Consumer
Now that we know how consumers think about BNPL, let’s explore the profile of the various consumer segments that use it the most. On a general level, we found that 47% of parents with children were heavy BNPL users, with more than one-quarter of them choosing it instead of other available credit options. BNPL adoption rates are highest among Gen Z and millennial consumers, demonstrating the wide appeal of BNPL to populations still building their spending power.
Notably, while most generations used BNPL strategically as choice users, Gen Z shoppers where more likely to use BNPL out of necessity. Around one-third of high-income consumers use BNPL, yet middle-income consumers are most likely to use BNPL, at 38%. In line with our necessity user hypothesis, consumers living with monthly budget limitations and have a lower income are also more likely to use BNPL programs to lessen the upfront cost of needed purchases.
For example, paycheck-to-paycheck customers who have issues paying their bills are using BNPL at a significant 43% clip. When we sliced the data by “necessity users,” however, only 14% of our total sample used BNPL. This highlights that despite early assumptions, BNPL is often a choice, suggesting general BNPL growth can continue its upward trajectory. It is also significant that 25% of consumers who make more than $100,000 annually are using BNPL by choice.
BNPL bests credit for everyday items, especially online
BNPL is often considered a Gen Z or millennial payment method. Our findings confirmed there is something to that perception. Although 23% of consumers would use BNPL for everyday items, this figure climbs considerably among younger users. The share for Gen Z consumers is 28% and for millennials, 35%. In comparison, 22% of consumers would use general-purpose credit card-linked installments for everyday items. While 30% of Gen Z still reaches for a traditional payment method to make a regular purchase, 25% of millennials do. These age groups generally outpace others in electing to cover everyday items with BNPL.
What the BNPL Consumer Is Spending On
Again, separating the respondents by necessity and choice, we found consumers used BNPL for a surprising level of everyday purchases. By necessity, 40% of BNPL consumers used the method for clothing and accessories purchases in the last year. Groceries came in third at 22%, with everyday categories like gasoline and health and beauty products also strong. Fourteen percent of necessity users purchased luxury goods.
We then turned our attention to larger purchases — products costing more than $1,000. Home furnishings and appliances were by far the most popular for BNPL usage. Technology and electronics followed in second place.
All the same, consumers use BNPL on a wide range of items and often over other installment options. For example, one-third of consumers used BNPL for clothing and accessories in the last year. Likewise, electronics and home furnishings show significant BNPL consumer usage, at 23% and 19% respectively. Alongside its heavy use on everyday items, these big-ticket purchase patterns underscore BNPL’s versatility.
The heavy use of BNPL for everyday essentials like groceries highlights its role in managing routine expenses for some consumers. In their most recent transactions, many turned to BNPL for its convenience and flexibility: 14% for necessity users and 16% for choice users. However, 12% of necessity users said they had no other option to afford a purchase without BNPL. Just 4.3% of choice users said the same.
Conclusion
BNPL’s evolution into a preferred financing option reflects a shift in consumer payment preferences. The method’s simplicity and convenience, which enables installment payments without interest over a short timeframe, appeals to many consumers. As the digital economy expands, BNPL’s role in consumer finance should continue to grow. BNPL providers need to enhance user experiences, experiment with payment plans and leverage data analytics in partnership with merchant networks.
Understanding BNPL users’ unique preferences and spending behaviors is essential for optimizing these services. Merchants should focus on promoting BNPL for smaller purchases to attract cost-conscious consumers and leverage partnerships to enhance customer satisfaction and retention. After all, a robust merchant network and userbase is crucial for BNPL providers.
