Last month, Billboard reported that around 60 percent of general admission attendees of the music festival Coachella financed their tickets through a “Buy Now, Pay Later” (BNPL) payment plan. These programs function as short-term loans, allowing consumers to pay for purchases in a series of installments — often with low or no interest. Now, while this figure was troubling, it was not inherently alarming: in theory, BNPL offers flexible access to short-term credit, and as long as each installment is paid on time, no additional costs are incurred.
But that caveat is proving more than hypothetical, as more and more US consumers fail to repay their loans. In its Q1 earnings release, Klarna, one of the largest BNPL providers, reported a net loss of $99 million — up more than 100 percent from the previous year. Klarna also posted a 17 percent year-over-year increase in customer credit losses, meaning that it made more money off of late fees than last year, both in total and as a share of total lending. Much of that growth increase stems from the BNPL industry’s aggressive expansion in the United States, exemplified by Klarna’s partnership with DoorDash in March and the announcement just days ago that Costco would partner with Affirm on purchases above $500.
In other words, US consumers are increasingly taking out loans to attend concerts, order takeout, and buy groceries — and are increasingly failing to pay back those loans on time. Survey data shows that Gen Z and millennial consumers are more likely to use BNPL plans to finance travel costs, especially those involving live events. Within those demographics, according to a Federal Reserve report from December 2024, people with lower credit scores and overall financial well-being indicators are more likely to use BNPL programs. While people on firm financial footing may find that BNPL offers them a convenient way to spread out their payments toward a major purchase, such as plane…
Auteur: Casey Wetherbee
