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Read on: Check out our US Buy Now, Pay Later Forecast 2022 report to learn about what鈥檚 driving growth in the sector. This article originally appeared in Insider Intelligence's Payments Innovation Briefing鈥攁 daily recap of top stories reshaping the payments industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily. Are you a client? Click here to subscribe.

As well as keeping prices low, retailers should look for ways to offer more convenience to consumers鈥攕uch as by expanding click-and-collect capabilities, extending return windows, or allowing flexible payment options such as BNPL鈥攖o encourage shoppers to spend.

Despite the warning, Mastercard is working on projects that can set it on a path for long-term growth鈥攍ike its investments into buy now, pay later (BNPL). Mastercard is building out its own BNPL program with merchants and fintechs. It recently signed a deal with Switzerland-based fintech ZoodPay to expand its prepaid virtual installment card product in Eastern Europe, the Middle East, and Africa.

More than one-third of US Gen Zers have used BNPL recently.

Financial institutions (FI) and fintechs have sought to close the gap between what patients can afford versus the cost of medical care with credit cards and鈥攎ore recently鈥攚ith buy now, pay later (BNPL) products. Synchrony鈥檚 CareCredit and Wells Fargo鈥檚 Health Advantage credit cards are two of the most popular medical cards.

This might include banking services that reach underbanked populations, buy now, pay later (BNPL) support for Gen Zers, or value-added security features that win over nervous holdouts. Read the full report.

Holiday shopping helped lift buy now, pay later (BNPL) volume in Q4 but couldn鈥檛 compete with 2021鈥檚 BNPL surge. Some clients tightened their lending standards, which also hurt Marqeta鈥檚 volume. What鈥檚 next? Marqeta anticipates a modest slowdown in consumer and business spending in 2023鈥攖hough not to the extent that a recession would bring.

The opportunity: Financial and payments institutions like buy now, pay later (BNPL) platforms have users who are often close to the point of purchase, making the platforms a ready opportunity for serving ads. The drawbacks: Financial websites ranked lowest among websites where US consumers are most receptive to ads, according to a Q3 2023 study from Integral Ad Science.

The number of US buy now, pay later (BNPL) users will reach 88.2 million this year, representing over a third of US internet users. We expect that number to grow to 104.6 million by 2026, driven by growing merchant acceptance and increased usage among younger generations. Klarna is pushing further into in-store BNPL services, giving advertisers a chance to reach consumers in-store as well as online.

Apple is furthering its push into finance with its buy now, pay later (BNPL) offering, Apple Pay Later, and its new high-yield savings account, which could tap into customers interested in financial services integration with their digital wallet, said Toplin.

We may see more providers following Klarna鈥檚 path: It recently launched pre-issued refunds on eligible returns paid for with its BNPL product. Travel and events will remain top spending categories:. US spending on movies and live performances grew 31% YoY through September 2023, per Mastercard.

And it鈥檚 reportedly been mulling a move into buy now, pay later (BNPL) with a deal for ZestMoney. PhonePe's plans to expand into insurance, wealth management, and lending will also help it diversify, and tech investments should improve its products.

EPI also intends on adding buy now, pay later (BNPL) financing and digital identity features. How we got here: EPI is a coalition of major European banks, credit institutions, and other payments firms that joined together to build a pan-European payment network to compete with the likes of Visa and Mastercard.

And Amazon partnered with Affirm to bring buy now, pay later (BNPL) to US and Canadian customers. Related content: Check out what our Retail & Ecommerce analysts have to say about Buy with Prime鈥檚 expansion. This article originally appeared in Insider Intelligence's Payments Innovation Briefing鈥攁 daily recap of top stories reshaping the payments industry.

In the US, PayPal is building out its service suite to include buy now, pay later; crypto; and small-business features, among others. That creates more use cases for the wallet, helping it become a go-to app for a consumer鈥檚 financial services needs鈥攊ncluding P2P.

Its latest include buy now, pay later and savings account options, giving consumers more reasons to engage with the tech giant鈥攁nd use P2P along the way. They can tap generational tailwinds by targeting younger consumers.

That鈥檚 driving up use of alternative payment methods like buy now, pay later (BNPL), which accounted for $25.9 billion of online sales in the first four months of 2024鈥攁n increase of 11.8% YoY, per Adobe. The shifting retail landscape: Adobe鈥檚 report found that shoppers chose cheaper products across a number of categories, including personal care, electronics, apparel, furniture, and grocery.

Aside from standard debit and credit card checkout, consumers already have access to offerings like one-click checkout; buy now, pay later (BNPL); and network-branded payment offerings. It might be hard for the forthcoming wallet to stand out from the noise. And some consumers may resist signing up for another checkout option.

Gen Z鈥檚 love of digital payments is well known, especially for peer-to-peer apps like Venmo and buy now, pay later (BNPL) options. They鈥檙e also quickly growing adoption of in-store digital payments like Apple Pay: While they currently trail millennials, by 2026 the gap will narrow (42.1 million Gen Z users versus 45.6 million millennial users) as Gen Z continues to build buying power.

Shoppers also took full advantage of flexible payment options: Buy now pay later accounted for 7.6% of online orders, or $1.08 billion of spending, an increase of 16.4% YoY, per Adobe. Sellers push back: While Prime Day was a success from a spending standpoint, events leading up to and during the sale exposed the growing tensions between Amazon and its sellers.

Gen Z is the generation most likely to use buy now, pay later services to make a purchase, which makes sense, as the cohort includes younger buyers who haven鈥檛 built up credit yet but still want to finance small purchases.

Recession could push debt-wary credit card users to payment methods they view as less risky, like debit cards; buy now, pay later (BNPL) loans; and cash. Issuers can emphasize payment flexibility, affordable financing, and no-fee balance transfers to risk-worthy cardholders. Tailor rewards toward consumer staples.

AI saved Klarna about $10 million annually, the buy now, pay later provider noted. It uses AI for copywriting, generating images, and other tasks. The company cut external agency expenses by 25% and credited AI with making it 鈥渓eaner, faster, and more responsive.鈥�. Time and task saver: Klarna鈥檚 moves reflect a broader trend.

So I think we'll see more expansion of these three to 12 month payment plans with fixed fees that are essentially much lower interest rates and maybe more affordable for consumers. Sara Lebow:. I'm interested in how those Buy Now, Pay Later stats become maybe in the next few years, more of an economic indicator, especially if we'll be able to see where people are using Buy Now, Pay Later.

BNPL providers like Affirm and Klarna, which are already popular with Gen Z, have also launched debit cards to capture more spending volume.