- Key insights: About 16% of consumers took out a buy now/pay later loan in 2025, according to the Federal Reserve, as more low-income consumers turn to the short-term installment loans for everyday expenses such as groceries.
- What's at stake: Most BNPL loans are not furnished to the credit reporting agencies, which creates a blind spot for banks that underwrite consumer credit.
- Expert quote: "Boards should be asking one question right now: are we underwriting the borrower we think we have, or the one who actually exists?" —Anna Kooi, partner at Wipfli.
Consumers continue to use buy now/pay later loans for everything from tech gadgets to groceries, and it's creating risk for banks.
Most BNPL loans are
"BNPL is still largely invisible debt," Anna Kooi, a partner at Wipfli, told American Banker. "Most pay-in-four loans don't appear on a credit report, so a bank underwriting a credit card,
About 16% of consumers took out a buy now/pay later loan in 2025, a number that has been steadily increasing since 2021, according to a Federal Reserve report that analyzed data from its 2025 Survey of Household Economics and Decisionmaking.
Women were more likely to use BNPL than men, with 19% of women saying they used the lending product in 2025, compared with 14% of men. Young adults, adults without bachelor's degrees, and Black and Hispanic adults were also more likely to use BNPL.
Consumers with lower income, lower credit scores, debt repayment struggles or revolving credit card balances were also more likely to use BNPL. And consumers whose annual salary was less than $50,000 were more likely to use the credit product for groceries, food delivery services and clothing or accessories.
"BNPL usage was 31 percent among adults whose largest emergency expense they could cover using only their savings was less than $100, and it steadily decreased to 8 percent among adults able to cover an emergency expense of $2,000 or more," the report said.
The rise in BNPL usage comes as
"The whole economic system is driving people to use these products, which is ultimately creating more risk in the market," Daniela Hawkins, a partner at Capco, told American Banker.
It also comes as more merchants partner with fintech BNPL providers. Klarna has more than
"Being selected as Fanatics' preferred BNPL partner is a meaningful milestone for Afterpay as we continue expanding into high-intent shopping categories where flexibility matters," said Tanuj Parikh, head of Revenue, Cash App and Afterpay, in a statement.
There are steps banks can take to mitigate credit risks, Wipfli's Kooi said. "Until [BNPL loans are reported to the credit bureaus], banks should assume debt-to-income is understated for a meaningful share of applicants, particularly younger and thin-file borrowers."
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Banks should also be using their own data to evaluate whether their customers are carrying multiple BNPL plans at once, if BNPL payments are triggering nonsufficient funds or overdrafts, or if BNPL use is migrating to essential spending.
"Banks already have the data to see BNPL behavior in their customers' accounts," Kooi said, noting that banks holding the deposit account can see recurring payments to BNPL providers, and that
"Every credit cycle has a blind spot, and BNPL is this one's," Kooi said. "Boards should be asking one question right now: are we underwriting the borrower we think we have, or the one who actually exists?"
