The Buy Now, Pay Later Generation: What Financial Institutions Need to Know
You've seen it at checkout: Klarna, Afterpay, Sezzle, Zip, and others. What was once a niche payment option has become a mainstream lending product. Buy Now, Pay Later (BNPL) has grown rapidly in recent years. According to recent research, 91.5 million American consumers were predicted to have used BNPL in 2025, representing 5.78% year-over-year growth, with overall adoption expected to continue rising.
U.S BNPL Users (in millions)
Financial institutions have started to wonder, is BNPL becoming the new credit card? The answer is no, or at least not yet.
Credit cards remain the dominant form of consumer credit. The biggest shift happening right now is in the expectations of tomorrow's borrowers.
While consumers of all ages have embraced installment-based financing, younger borrowers are adopting BNPL at significantly higher rates than older generations. According to recent survey data, nearly half of Gen Z and Millennial consumers have used BNPL services, compared to just 21% of older consumers.
During the 2024 holiday shopping season, J.D. Power found that 54% of Gen Z consumers used BNPL compared to 50% who used credit cards, the first time BNPL usage surpassed credit card usage among Gen Z in the study's history.
That research doesn't suggest credit cards are disappearing, but it does suggest younger consumers are developing different borrowing habits than previous generations. For many Gen Z consumers, BNPL isn't just a payment option, it's their first meaningful experience with credit.
What Gen Z Is Learning About Borrowing
Every generation develops expectations based on the financial products they encounter first. For decades, young adults were introduced to borrowing gradually. They might have been added as an authorized user on a parent's credit card, opened a secured credit card with a small limit, or established their own relationship with a local bank or credit union before taking on credit.
Gen Z's experience is now different.
Today's young consumers can access credit directly at the point of sale, often within seconds and without what feels like a traditional lending process. The loans themselves are often small, with the average BNPL transaction being approximately $135. But that may be part of what makes the model so appealing. A purchase split into four predictable payments can feel less intimidating than applying for a credit card, managing a revolving balance, or trying to calculate interest charges.
“29% of BNPL users have used the service to purchase groceries”
That is influencing how consumers use the product. A recent survey found that 29% of BNPL users have used the service to purchase groceries, suggesting many borrowers view BNPL less as a financing option for large purchases and more as a tool for managing everyday cash flow.
Many BNPL providers have also built flexibility into the experience through payment reminders, repayment management tools, and the ability to reschedule payment dates. And historically, many BNPL loans have not been broadly reported to credit bureaus, further contributing to the perception that these products carry lower stakes than traditional credit.
To financial institutions, BNPL is still a form of borrowing. But to many young consumers, it feels less like debt and more like a budgeting tool. And those perceptions will shape what a generation expects from credit moving forward.
How BNPL is Reshaping Lending Expectations
Consumers are becoming accustomed to a different borrowing experience. They expect credit to be:
Transparent
Easy to understand
Mobile-first
Available instantly
Structured around predictable payments
Once these initial expectations are set, they’ll influence every future borrowing decision.
Financial Institutions Are Already Responding
Many banks and credit card issuers have recognized this shift and are already adapting their lending products, and their marketing.
Installment-payment options tied to existing credit cards have become more and more common. Consumers can make a purchase using their credit card and convert it into fixed-payment plans and, in some cases, avoid interest or fees if balances are repaid within a designated period. Examples include American Express (Plan It), Chase (My Chase Plan), Citi (Flex Pay), and U.S. Bank (ExtendPay). But the goal isn’t to become the next fintech.
The institutions that succeed with Gen Z will combine the education, trust, scale, and relationship advantages of traditional banking with the seamless and transparent digital lending experiences this generation will demand. That’s where the real value is.
Looking Beyond Today's Borrower
Today, Gen Z represents a relatively small share of overall lending volume. Tomorrow, they will be applying for auto loans, mortgages, personal loans, home equity products, and business financing. The institutions that understand these expectations today will be better positioned to earn Gen Z's business tomorrow.
Borrowers aren't rejecting traditional credit. They're signaling a preference for borrowing experiences that feel simpler, more transparent, and easier to manage. BNPL may never replace the credit card. But it is helping shape a generation's expectations of credit, and that could have a lasting impact on the future of consumer lending.