The news: Buy now, pay later (BNPL) users tend to suffer from worse financial constraints than nonusers, per Federal Reserve Bank of Kansas City research.

Key findings: BNPL has higher adoption rates among millennials, Gen Zers, and the financially vulnerable. These groups may financially benefit from BNPL giving them accessible lines of credit, predictable installment plans, and relative convenience. 

But consumers using BNPL may overextend themselves on purchases, take out simultaneous installment plans from multiple providers, and incur hefty fees and penalties for missed payments. 

• Nearly half (48%) of all BNPL users had four or more indicators of financial constraint—versus 82% of non-users who had three or fewer.
• The Federal Reserve of Kansas City found that 15% of BNPL users with late payments can be typified as severely financially constrained.

BNPL consumer behavior trends: How consumers use BNPL speaks to the fragility of their financial health, per a LendingTree survey.

• 41% of BNPL consumers made at least one late payment in the past year, up from 34% the previous year.
• 25% of BNPL users have used installment loans to buy groceries, up from 11% last year.
• 23% of BNPL users have held three or more active BNPL loans at one time.
• 33% see BNPL as a “bridge” to their next payday.

Our take: While snapshots of some BNPL users’ financial health can feel dire, reported metrics from BNPL providers themselves signal a more measured take on default rates. 

Klarna’s Q1 2025 credit loss rate hit 0.54%—a 0.03 percentage point increase YoY. That uptick is hardly a financial five-alarm fire. BNPL consumers are certainly vulnerable, but this isn’t a canary in the coal mine quite yet.

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