Blockbuster Klarna IPO: “Buy Now, Pay Later” Popularity Grows

Is the American consumer resilient, or just desperate? The popularity of “buy now, pay later” (BNPL) installment plans in the 2020s could be a boon or a sign of imminent disaster, but it cannot be ignored either way.

It used to be called “lay-away” back in the old days, where you could buy something today irrespective of whether you could actually afford it. Then, a $500 item wouldn’t seem too expensive because it’s just four “easy” installments of $125 that you could pay down the road.

Heaven forbid if you miss any of those “easy” payments, as the interest rates and late fees would add up quickly. The next thing you know, you could end up paying $1,000 for a $500 item that you didn’t really need in the first place.

It’s not solely an American phenomenon, by the way. According to Research and Markets, the global BNPL market is anticipated to expand to $80.15 billion by 2033, with an implied CAGR of 27% from 2025 to 2033.

Naturally, BNPL opportunists like Affirm and Klarna will view the market’s proliferation as a good thing. Never mind the combined impact of BNPL debt along with credit card, auto loan, student loan, and housing debt.

Courtesy: @Barchart

It’s an odd scenario in which U.S. rent prices are up and families are struggling just to make ends meet – and yet, folks are buying discretionary items now and expecting to pay them off later. Is this simply a case of “doom spending” and Americans just giving up on saving their money for the future?

No matter how you slice it, somebody’s making a boatload of money from the BNPL trend. As evidence of this, Klarna just had its IPO and the stock price shot up 16%, sending the company’s market value to roughly $17.5 billion.

Critics of Klarna, Affirm, Afterpay, and other BNPL businesses might assert that these services encourage overspending. In response, Klarna claims that 99% of its loans to consumers in 2024 were paid off on time.

To that, I would seek clarification about how they would define paying a loan off “on time.” And if nearly everyone is paying off their BNPL loans in such a timely manner, how is Klarna generating revenue and profits?

I suspect that, whether we like it or not, the BNPL trend hasn’t peaked yet. Although Klarna has a user base of 111 million and the company currently partners with 790,000 merchants, there’s likely still room for growth for this and other BNPL service providers.

Courtesy: Research and Markets

One could say, I suppose, that Americans are simply following the government’s lead. As the U.S. racks up $37 trillion in sovereign debt, how can anyone demand that people should manage their money responsibly?

At the same time, the government won’t bail you out if you destroy your future through excessive BNPL spending. If you’re buying non-essential items through a BNPL plan, I’d like you to consider an alternative.

Instead of BNPL, why not try “Invest Now, Profit Later” or INPL? Granted, this strategy doesn’t provide the immediate gratification that a spur-of-the-moment BNPL might give you.

Yet, at least investing for the future is a sustainable strategy that can allow you to make occasional discretionary purchases later on. Then, you won’t need to buy now and pay later since you’ll have enough capital to pay fully in cash and sleep soundly at night.