[ModernRetail] BNPL usage surged during Q1 as middle-income shoppers increased adoption

[papy]

From the weekly MR email…

Good morning Modern Retail readers,

U.S. consumer sentiment hit a record low in May, according to new reports this morning. However, there’s one service that has allowed many consumers to keep spending even as their personal financial situation worsens: buy now, pay later.

Special projects editor Melissa Daniels had a meaty story this week checking in on the state of buy now, pay later. At a high level, the biggest players in the space like Klarna and Affirm had banner first quarters.

But there were a couple of data points that stood out to me from the piece. The first is that about 20% of BNPL users used three or more different services to finance their purchases, up from 12% five years ago, according to a Consumer Edge report. This report, which looked at the “new face” of BNPL, also found that households with children are now more likely to use buy now, pay later services compared to those without. And, one of the demographics that is seeing the fastest growth in BNPL usage is 35- to 44-year-olds.

“Put together, the data suggest that BNPL is especially resonating with adults in the peak spending years of growing their households,” Daniels wrote.

My takeaway is that increased BNPL usage and an overall rise in debt-fueled spending is really clouding the state of consumer health right now. Consumers right now are strained, but they also don’t want to make too many sacrifices and want to still be able to buy the things that are important to them. So, they are turning to levers like BNPL more frequently.

Will consumers continue to tap these services as gas prices continue to rise? It’s likely, unless there are some changes that start to make BNPL more untenable.

You can read more about how buy now, pay later usage surged in the first quarter of this year, and other top e-commerce stories of the week below.

Anna Hensel
Executive Editor

From the ME article: BNPL usage surged during Q1 as middle-income shoppers increased adoption

Buy-now, pay-later services are booming as low- to middle-income consumers look to stretch their budgets…The services are also seeing that shoppers are hungry not just for splitting up payments over time, but also for special deals.

Earnings results from both Klarna and Affirm this month showed significant growth in gross merchandise volume (GMV) on their platforms, as well as upticks in overall users.

A new report from Consumer Edge found that increased BNPL adoption is clustered among income groups earning up to $150,000 a year. While adoption is still highest among low-income households earning $40,000 or less, growth is just as prevalent among middle-income households earning $40,000-$150,000 a year.

The Consumer Edge report: Renters, Parents, and Older Millennials: The New Face of BNPL Growth

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For ecomm Sellers who can offer their own payment processing, do you offer services like Klarna or Affirm? Do you have other ways to offer shoppers a payment plan directly (outside of credit cards)?

For ecomm Sellers on sales channels where you don’t control payment options, is your channel offering a payment installments option? If not, are Sellers asking for this?

[papy]

As seen on Amazon. Two choices if you click, Affirm and Prime Visa. Both seem to need set up of some sort.

[Lost_My_Marbles]

That’s interesting on the Prime Visa as it say it DOESN’T earn % back rewards. Our Prime Visa does earn % back rewards. This makes us wonder if Amazon is getting ready to take something away …

[lake]

@Lost_My_Marbles

That’s interesting on the Prime Visa as it say it DOESN’T earn % back rewards. Our Prime Visa does earn % back rewards.

Amazon certainly has bean counters who would prefer to chuck the rewards in return for lowering the payments. Money is fungible.

Amazon is probably not taking anything away from you and other Prime Visa holders. It might feel different to the BNPL buyers who might not be all that sharp and need to count on their fingers and toes.

[papy]

@Lost_My_Marbles

Our Prime Visa does earn % back rewards.

When I clicked to terms for the pictured link at “Select plan,” it took me to here: Pricing and Terms.

But when I clicked through on any of the other places Amazon tries to get me to open a card (see below), it took me to Amazon’s standard Prime Visa page and does include cashback rewards: Amazon.com.

So I suspect that the lack of cashback rewards under the Visa offered through the “select [installment payment] plan” option is simply a different kind of Prime Visa account.

This was on that page:

^ That link goes to https://www.amazon.com/b?node=19185153011.

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FYI, not all items offer payment plan options–not even if it’s the same Seller. Maybe it’s price-restricted?

[Picks_by_Nisha]

This “split” is something Amazon does; not the seller. I’ve seen it on more than a few of the books I’m selling. And it does seem to be price based; maybe somewhere around $70-80, but I’ve never really researched it.

[papy]

Just sharing @Uncle_Leroy informative post over here. How many consumers using these BNPL “apps” realize that these can be reported against their credit as loans?

US economy chat ... econochat!

From Affirm’s help center https://helpcenter.affirm.com/s/article/affirm-credit-reporting-policy [image] From Klarna https://www.klarna.com/us/help/payments/what-happens-if-i-can-t-pay-on-time/ [image] It is usually on a case-by-case basis which company will share what. What people forget is that if/when they don’t pay, then those loans can be sold to debt collectors which are much more likely to report to the credit bureaus. What I thought was strange is that a couple days ago, CNBC rank…

And highlighting this link:

@Uncle_Leroy

What I thought was strange is that a couple days ago, CNBC ranked the best BNPL apps

The best buy now, pay later apps of May 2026

From the link:

Buy now, pay later (BNPL) loans allow consumers to make payments in small installments, usually over several weeks. Unlike credit cards, these short-term installment plans don’t require great credit and usually don’t charge interest.

Many BNPL providers have emerged in recent years, and consumers are increasingly flocking to them to finance everything from appliances to vacations. More than half of Americans (51%) have used short-term installment plans for online purchases, according to a Gallup poll from April 2026, including 10% who report relying on BNPL frequently.

[Picks_by_Nisha]

I was wondering how these apps differed significantly from regular credit cards. But if they don’t charge interest, how are they making money? Is it selling data? Or is it just from the selling of bad debt to collection agencies?
What am I missing?

[Lost_My_Marbles]

@Picks_by_Nisha

But if they don’t charge interest, how are they making money?

Usually … if the buyer misses a payment or doesn’t complete total amount in a certain time, then the buyer has to pay interest from day one to the end. Since a lot of these type buyers are putting off paying because they don’t really have the money, these companies know that in the end a good amount of them will fail and they will get to charge the interest.

[Picks_by_Nisha]

Of course! That makes sense.

And I would guess that they are somehow different enough from bank-issued credit cards to get around legal limits on interest rates (I know at one point, NC set a ceiling at 18%; don’t know if that’s still true, or what other states have done, or if interstate banking has made that impossible).

I’ll stick with my card that I’ve had so long that the bank has changed names 3 times since I got the card. (and I have others for backup when something goes wrong; a concept that seems to escape too many people posting on NSFE).

[lake]

@Picks_by_Nisha

But if they don’t charge interest, how are they making money?

I have offered BNPL in the past, in the real world.

I paid an amount equal to the credit card exchange fee to the lender. Not as much money as they were charging interest, but extra if the conditions pointed out by @Lost_My_Marbles will occur.