United States Buy Now Pay Later Services Market - Growth, Trends, COVID-19 Impact, and Forecasts (2023 - 2028)

The United States Buy Now Pay Later Services Market has achieved a market size of 70 billion USD in terms of payment value for the current year and is poised to grow at a CAGR of 27.5% for the forecast period.

Share of the young generation using BNPL had observed a continuous increase in 2021-22 as compared to 2020 with around 61% of people in the age group (18-24) using BNPL services and it is highest among all other groups showing a positive trend for BNPL market in the United States.

BNPL creates an economic model by adding a new layer to credit schemes. BNPL companies listed in the stock market of different countries are observing an increase in stock price. Mostly, BNPL is a method of spreading out the payment for a short period and is done over purchases made from retailers. Synchrony, Affirm, and Afterpay are a few companies leading the market by providing private credit in several merchant stores. For better financial management, BNPL spreads out the cost of purchase and provides its service by looking over borrower ability to pay, and merchants play a major role in finding these customers.

With the COVID-19 outbreak, most businesses had to shut down to prevent the spread of the virus. With an increasing number of people losing their jobs, resulting in a decline in disposable incomes, BNPL services created an opportunity for people to continue buying the necessary products even after losing their purchasing power. People without access to credit cards or with a poor credit history were also able to buy through BNPL, thus boosting the revenue of online channels and merchants.

With the increasing use of the BNPL option, the availability of other options such as credit cards, and the increasing credit and funding costs, competition in the market is continuously increasing. For BNPL, delinquency rate is observing a continuous increase, which had almost doubled post the pandemic compared to a credit card, which had an almost flat delinquency rate. However, consumers in the United States are adopting the BNPL method to continue their purchases.

US Buy Now Pay Later Services Market Trends

Income of US Households Affecting the BNPL Market

During the COVID-19 outbreak, the US BNPL industry observed a continuous increase with a decrease in the income levels of the country's households. US household income has observed a continuous increase since 2014 from USD 55,613. However, due to the pandemic, the median household income declined from USD 69,560 in 2019 to USD 67,521 in 2021, thus negatively impacting the consumption level of the population and leading to a shift toward BNPL. People with low income and young adults are using BNPL services and are paying the amount through their credit cards. This trend increased due to the growing number of people below the poverty line during the pandemic, from 33.98% in 2019 to 37.25% currently, which is close to the level of 2018.

Increase in Fintech Loans and Credit Market Affecting the BNPL Market

BNPL business originates from consumers and merchants, which is the opposite of the credit card market, where the business originates from banks and credit card companies. BNPL companies as a revenue recovery charge 5-6% of their transaction fee from retailers and merchants. The fee associated with BNPL is mostly greater than the fee associated with credit cards, with traditional credit cards having a processing fee of around 3%. BNPL has a processing fee of 4%. However, BNPL provides customers with the most accessible way of purchasing a product. The BNPL app downloads of major fintech companies observed a continuous increase from 2019 to 2021. However, a decreasing trend was observed in 2022 for firms like Pay Pal, Klarna, Afterpay, Affirm, Zip/Quad Pay, and Sezzle.

US Buy Now Pay Later Services Industry Overview

Despite improvements in the availability of better products and services in the BNPL market, there exists competition between the BNPL and credit card markets, with both trying to increase their market shares and be a part of customer payment methods to generate their revenues. However, BNPL's characteristics, such as accessibility to all classes of the population, no interest payment, or no additional charge when installments are made on time, make it more attractive than credit cards. It has major players; Afterpay, affirm, klarna, American Express and Pay Pal

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