BNPL is expanding fast, and that should worry everyone

When Nigel Morris tells you he’s disquieted astir the economy, you listen. As manufacture observers know, Morris co-founded Capital One and pioneered lending to subprime borrowers, gathering an empire connected knowing precisely however overmuch fiscal accent the mean American tin handle. Now, arsenic an aboriginal capitalist successful Klarna and different buy-now-pay-later companies similar Aplazo successful Mexico, he’s watching thing that makes him profoundly uncomfortable.

“To spot that radical are utilizing [BNPL services] to bargain thing arsenic basal and cardinal arsenic groceries,” Morris told maine connected signifier astatine Web Summit successful Lisbon this week, “I deliberation is simply a beauteous wide denotation that a batch of radical are struggling.”

The statistic backmost up his unease. Buy-now-pay-later services person exploded to 91.5 cardinal users successful the United States, according to the fiscal services steadfast Empower, with 25% utilizing the services to concern their groceries arsenic of earlier this year, according to survey information released successful precocious October by lending marketplace Lending Tree.

These aren’t the discretionary purchases — the decorator bags and latest Apple headphones that BNPL was marketed for originally. Borrowers aren’t paying it back, either. According to Lending Tree, default rates are accelerating: 42% of BNPL users made astatine slightest 1 precocious outgo successful 2025, up from 39% successful 2024 and 34% successful 2023.

Storm clouds connected the horizon

This isn’t conscionable a user concern story; it’s a canary successful the ember excavation for the full venture-backed fintech ecosystem and beyond. It points to what could make into a superior occupation — 1 that echoes the informing signs that preceded the 2008 fiscal meltdown but for 1 thing: it’s mostly invisible.

Most BNPL loans aren’t reported to recognition bureaus, creating what regulators telephone “phantom debt.” That means different lenders can’t spot erstwhile idiosyncratic has taken retired 5 antithetic BNPL loans crossed aggregate platforms. The recognition strategy is flying blind.

“In a satellite where, if I’m a buy-now-pay-later provider, and I’m not checking bureau data, I’m not feeding bureau data, I americium oblivious to the information that Nigel whitethorn person taken retired 10 of these things successful the past week,” Morris explained. “[That’s] perfectly true.”

The numbers that are disposable are some disfigured and dated. Consumer Financial Protection Bureau information published successful January of this twelvemonth — aft the bureau issued marketplace monitoring orders to large BNPL providers including Affirm, Afterpay, and Klarna — showed that astir 63% of borrowers originated aggregate simultaneous loans astatine immoderate constituent during the year, and 33% took retired loans from aggregate BNPL lenders.