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BNPL transaction value reached $120 billion in 2021: GlobalData

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The buy now, pay later (BNPL) industry reached a new milestone with the amount spent on its services in 2021, according to a new report from GlobalData.

GlobalData estimated that the BNPL providers — such as Affirm (AFRM) and Klarna — reached a global transaction value of $120 billion in 2021, and will likely hit $576 billion by 2026. In contrast, global transaction value in 2019 was only $33 billion.

The BNPL space has been red-hot for fintech players like Affirm and Klarna, with established companies like Mastercard (MA) and Visa (V) jumping into the foray. Big Australian player Afterpay was acquired by Block (SQ) in August 2021.

"BNPL is booming in popularity," Chris Dinga, a payments analyst at GlobalData, said in a press release. "This rapid growth was down to an increasing number of merchants accepting these solutions. There have been some huge partnerships with e-commerce giants such as Amazon and Shopify opening up a whole new world of consumers.”

Jayme Jo Massoud poses inside a pink Cadillac in the valet parking area as part of BNPL company Klarna's Uncensored Runway on November 25, 2020 in Sydney, Australia. (Photo by Don Arnold/Getty Images for Klarna)
Jayme Jo Massoud poses inside a pink Cadillac in the valet parking area as part of BNPL company Klarna's Uncensored Runway on November 25, 2020 in Sydney, Australia. (Photo by Don Arnold/Getty Images for Klarna)

Millennials and Gen Z are BNPL's core customers, according to GlobalData. “Millennials and Generation Z are attracted to the simplicity and speed of BNPL loans, as well as their interest-free nature," Dinga explained. "Even though banks are taking steps to appeal to younger generations, their efforts are falling short.”

There are some headwinds for BNPL players as part of a wider shift in the tech sector. Many of these companies are now announcing layoffs to deal with costs, as the market has taken a turn for the worse. Klarna, for instance, announced a 10% reduction in staff.

Former regulators have warned users about the potential pitfalls of using BNPL.

In a Yahoo Finance op-ed, Sheila Bair, former chair of the FDIC and former assistant secretary of the U.S. Treasury for Financial Institutions, wrote: "Instead of replacing credit card debt, I fear BNPL is creating new burdens on the cash flows of young households — ones that already struggle under high levels of student debt, credit card debt, and the rising costs of housing and food (to say nothing of all the entertainment subscription services they love). This is a financially fragile population, consisting of households that have not yet built wealth and a stable earnings capacity. Many also lack sufficient financial understanding and discipline to resist the relentless marketing of BNPL providers. My Klarna app sends me near-daily emails featuring pictures of smiling youthful consumers pushing their retailers’ latest deals."

Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.

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