Buy Now, Pay Later: Exploring the Market of the Most Flexible Payments
- MD Finance Team
- Aug 8
- 4 min read
Updated: Aug 21
Buy now, pay later (BNPL) has become one of the most dynamic trends in consumer finance. BNPL gained popularity during the COVID-19 pandemic, when e-commerce penetration surged, and it continues to hold a top position thanks to its flexibility and transparency.
By 2030, the global BNPL industry is expected to reach $910.3B in gross merchandise value (GMV) and $39.9B in total income earned by BNPL providers.
On the other hand, BNPL players face a number of challenges. Established payment networks, card issuers, and digital wallets – including PayPal, Block, American Express, Visa, and Mastercard – are rapidly expanding BNPL offerings to capture space on merchant checkout pages. At the same time, regulators are introducing new rules that could significantly influence the BNPL business model.
In recent years, profitability pressures have reshaped the industry’s priorities. Many BNPL providers have undertaken significant layoffs and cost-cutting programs to preserve capital, shifting the focus from rapid expansion to sustainable growth. After years of negative net income driven by a “growth at all costs” strategy, some players – notably Klarna – have begun posting positive results, signalling that profitability is within reach. Moody’s warned in late 2023 that 2024 would be a pivotal year for the sector to balance cost control with revenue growth, cautioning that those failing to adapt risk ceding ground to traditional banks.
How BNPL Works
BNPL schemes allow customers to split their purchases into interest-free instalments – typically four payments over a few weeks – instead of paying the full amount at checkout.
While first adopted in e-commerce, BNPL is rapidly expanding into physical stores, enabled by QR codes and scannable barcodes.
A typical transaction involves:
The customer selects a product and the BNPL option at checkout. This usually has no direct impact on the customer’s credit history.
The BNPL platform approves a credit line.
The platform pays the merchant in full and assumes full responsibility for the credit risk.
The customer pays the first instalment immediately and the remainder in equal, scheduled payments.
Most BNPL services support borrowing up to $1,000 and remain interest-free if repayments are made on time. Late payments incur fees or interest, similar to credit cards.
Global Market Overview
The BNPL market is driven by e-commerce growth and greater digital adoption, rising consumer demand for flexible and transparent payments, and ongoing diversification into in-store retail, travel, healthcare, and B2B.
In 2025, the market is projected to reach $560B in transactions. Online BNPL spend already exceeds $340B globally:
North America: U.S. leads with $126B in e-commerce BNPL and $107B in POS BNPL.
APAC: China follows with $96B in e-commerce and $92B in POS, with Australia and India also seeing rapid growth.
Europe: Strong adoption in Germany, the UK, and France (each ~$20-25B).
Emerging markets: Brazil, Mexico, Saudi Arabia, and Nigeria show early POS traction.
Despite this growth, profitability remains a challenge. High operating costs, credit losses, global expansion expenses, and intensified competition from neobanks and big tech have kept many providers in the red. Affirm, Afterpay, and other notable players have posted significant losses in recent years.
However, profitability is achievable. Clearpay in the UK and PayPo in Poland began showing positive net profit in as little as four years of operation. Klarna was profitable for the first 14 years of its operations until 2019, when a strategic shift toward growth and international expansion led to a period of losses.
For merchants, BNPL can increase average order values and conversion rates. Integration is straightforward, with APIs embedding the payment option into online and mobile checkouts without significant development work.
State of BNPL Regulation Worldwide
Most European countries treat BNPL as a form of consumer credit under existing laws. The new EU Consumer Credit Directive (CCD2) will bring short-term, low-cost BNPL into scope by 2025–2026, mandating credit checks, APR disclosure, fee caps, and reporting to credit bureaus. The UK is preparing draft legislation, while Germany and the Netherlands, which currently exempt short-term interest-free BNPL, will include it under CCD2.
In the Asia-Pacific region, Australia, South Korea, Malaysia, and New Zealand are introducing dedicated BNPL laws. Singapore and Hong Kong leverage self-regulation under supervisory oversight. China and India regulate BNPL via broader digital lending rules, while Vietnam, Thailand, and Taiwan remain largely unregulated.
The US has no federal BNPL law but enforces consumer protection rules through the CFPB (e.g., classifying BNPL under the Truth in Lending Act). Canada regulates the sector at the provincial level, leading to fragmented requirements. Both countries are increasing oversight without a unified framework.
Most countries in Latin America apply general consumer credit or e-commerce laws. Brazil, in particular, requires BNPL providers to be licensed financial institutions.
Saudi Arabia operates a formal BNPL licensing regime under SAMA. Nigeria and South Africa rely on existing lending and consumer protection laws, while the UAE lacks dedicated BNPL regulation and often sees providers operate from free zones.
Across regions, regulators are closing loopholes that previously allowed BNPL to operate outside traditional lending rules, focusing on mandating credit checks, clear disclosures, limits on fees and interest, and avenues for consumer redress.
In Conclusion
BNPL is shifting from a rapidly growing, lightly regulated sector to a more mature, compliance-driven industry. This evolution will test business models but will also help create a more sustainable and trusted market for consumers, merchants, and investors.
Read the full report to explore major BNPL players and their performance, common causes of business failures, recent investments and market developments.
