In just a few years, Buy Now, Pay Later (BNPL) has become one of America’s go-to payment methods. According to data from the Consumer Financial Protection Bureau, the number of loans surged by almost 1,100% between 2019 and 2021.
This isn’t surprising. Buy Now, Pay Later presents a great opportunity to spread out the financial impact of a big purchase. However, where there are loans, there is debt, and, as reports show, BNPL schemes have created a $700 billion black hole that remains unaccounted for.
What caused the downfall of BNPL? Why did this once-celebrated payment method turn into a financial crisis for so many? And most importantly – are there better alternatives? We’ll answer these questions and more in the article below.
Buy Now, Pay Later payment schemes do exactly what they say – you can purchase an item without paying for it in full until later. Unlike traditional financing options that require credit checks and long approval processes, BNPL allows almost anyone to split payments into installments with minimal upfront verification. This makes it an attractive option for consumers with lower credit scores.
While initially, BNPL seemed to be a fantastic solution for both consumers and retailers, the growing BNPL risks – such as hidden fees, mounting debt cycles, and lack of regulation – have ultimately caused more harm than good.
Although BNPL might seem like a relatively new phenomenon, it’s not much different from traditional installment payments for big-ticket items. The main difference lies in who can access it and how it is used.
To understand why BNPL gained such momentum so quickly, we have to go back to the pandemic. With lockdowns limiting in-person shopping, e-commerce accelerated to a new horizon. Thanks to low interest rates and merchants willing to do whatever is needed to keep sales going, BNPL had the perfect environment to grow. People were spending more money, too – credit and debit card data revealed a nearly 20% increase in online spending since January 2020.
With more consumers embracing online shopping, it’s easy to see why BNPL became a go-to payment method. The idea of deferring payment without needing to deal with immediate interest is tempting to consumers, especially budget-conscious millennials and Gen Z. Major players like Klarna, Affirm, and Afterpay capitalized on this demand, reaching multi-billion-dollar valuations.
In fact, a study by Nerdwallet shows that nearly one in five shoppers (22% of Gen Z) chose BNPL as their preferred payment method. The appeal lay in its promise of customization, flexibility, and transparency – or at least, that’s how it was marketed. However, what many consumers didn’t anticipate was how easily these payments could spiral into unmanageable debt cycles. While trying to avoid debt, many of these consumers ended up accumulating even more.
Although BNPL promised to make checkout seamless, it introduced more problems than solutions. In fact, 56% of BNPL users admit they have experienced at least one issue, like missing payments or overspending while using the service.
Interestingly, among all consumers who have faced BNPL-related issues, Gen Z has encountered the most problems.
As easy as it is for shoppers to use BNPL, many now find it challenging to make the payments. Here are the main BNPL risks you should be aware of:
Despite its quick success, the BNPL model began facing cracks as merchants started losing trust in its long-term sustainability.
When BNPL gained popularity, it was marketed as a hassle-free, no-cost way to finance purchases. But, in reality, many users have been surprised by hidden fees and complicated terms, which go against what the service initially promised – transparency and consumer protection. In some cases, BNPL providers may charge higher interest rates than those on traditional credit cards.
At first blush, BNPL might seem like a good solution for both the retail and consumer. However, as research shows, customers using these services usually end up spending more than those who don’t. More than half of BNPL users (57%) reported regretting purchases they couldn’t afford. Data also indicates that BNPL could facilitate overborrowing, creating financial strain for consumers who already have financial difficulties.
Given that Americans are already carrying over a trillion dollars in credit card debt, this is a significant issue.
Whether you hope to improve bad credit or wish to establish a credit history, a BNPL plan won’t be of much help. However, if you miss one of your payments, it could harm your credit score and make it much more difficult to get credit down the road for buying a property, a car, or anything else that requires financing.
While there may be cons to credit cards, the one good thing about them is that you can easily return your purchase and get a refund. That may not be the case with BNPL. Consumers who wish to return their items will usually have to contact the lender and seller; even then, there is no guarantee of getting your money back.
Companies using third-party BNPL platforms must trust that their provider’s checkout fraud prevention measures are up to par. A glaring loophole for criminals is BNPL’s ability to let users purchase products without immediate payment. This is an aspect that can (and has been) highly exploited, leading to an increase in fake accounts and stolen identities.
On paper, BNPL was a brilliant idea – empowering consumers with instant access to goods and services without the heavy upfront financial burden. The problem was its execution. At Krepling Pay, we’ve learned from their mistakes and have created a better checkout system that keeps friction low without harming customers or merchants. What does it mean exactly?
Traditional payment systems often require customers to navigate through multiple steps, leading to cart abandonment. What BNPL promised, we delivered!
Krepling Pay allows customers to enjoy frictionless payments through one-click checkout and wallet integration, which means you can make instant purchases without worrying about risky debt afterward. We also have a save-payment feature that makes it easier to make repeat purchases.
There’s nothing worse than hidden fees – we get it. That’s why at Krepling Pay, we prioritize transparent pricing. When you partner with us, you’ll get a clear breakdown of what and how much you’re paying. No monthly fees, no setup fees, no PCI fees, and no late fees. Our pricing is as simple as it gets.
A 2023 report by the Federal Trade Commission showed consumers losing more than $10 billion to fraud. We don’t want you or your customers to become a part of this data; that’s why we use advanced fraud detection and tokenized payments to prevent fake purchases and data breaches.
One of the biggest problems with Buy Now, Pay Later services was the high number of returns. At Krepling Pay, we ensure only high-intent buyers complete transactions.
At Krepling Pay, we don’t believe in short flings. We’ve taken lessons from common Buy Now, Pay Later problems and designed our service to build long-term customer trust – not just drive instant conversions. This applies to our checkout experience as well. We want to ensure all parties are satisfied, and that’s why we always take a responsible and ethical approach. But don’t just take our word for it. Our merchants report:
With traditional payment methods, you sometimes have to deal with geographical limitations. Unfortunately, in today’s competitive market, this can sometimes be the difference between success and failure. In fact, studies indicate that 92% of shoppers prefer to make purchases on sites that price in their local currency, and 33% are likely to abandon a purchase if pricing is only in U.S. dollars.
We understand this, that’s why Krepling Pay supports multi-currency transactions and is compatible across all devices and browsers. This will allow your business to reach a wider audience without any technical barriers.
According to a study by PMNTS, 53% of companies reported improved cash flow management after implementing real-time payment systems. It’s no secret managing cash flow is one of the most important parts of running any business. That’s why, with Krepling Pay, you’ll get automatic daily payouts, with funds typically available within one to three business days.
Overall checkout experience can be a dealbreaker for customer retention. If your clients need to go through six different pages before completing the purchase, well… There’s a big chance they’re not coming back.
In fact, 91% of e-commerce shoppers admit a satisfying checkout experience significantly influences their decision to shop with a merchant again. Keeping this in mind, Krepling Pay offers a digital wallet that remembers and encrypts customer details, which allows quick and secure repeat purchases.
BNPL started as a promising solution, giving consumers a way to break up payments without the burden of traditional credit. However, as we’ve seen, hidden fees, risks of overspending, and lack of consumer protection turned it into a financial trap for many.
Major BNPL providers skyrocketed in value, only to face stock crashes as merchants and consumers began to see the cracks in the system.
But that doesn’t mean seamless, flexible payments have to come with risk. At Krepling Pay, we’ve taken the best aspects of BNPL – frictionless payments, quick checkouts, and convenience – while removing the financial pitfalls that put consumers and businesses at risk.
Ready to upgrade your checkout experience? Join the businesses already benefiting from Krepling Pay and give your customers a payment solution that works – without the hidden costs.
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