BNPL Shifts to Cards and Wallets for New Growth

Buy now, pay later has been hitting an adoption wall, and could be losing momentum with the critical Gen Z and millennial age groups.

The recent holiday shopping season tells a lot about BNPL’s struggles. PYMNTS Intelligence survey data shows that 14% of shoppers paid with BNPL in the three months through December, down slightly from 15% from both last October and November. Yes, survey results can fluctuate month to month, but it’s clear that Santa left some coal in BNPL’s stocking.

If total holiday spending had declined, that would be the end of the story, but U.S. consumers went on their usual shopping spree. The U.S. Census Bureau reports total retail spending climbed about 3% year over year last November and December to reach $1.5 trillion. Meanwhile, the New York branch of the Federal Reserve says that consumer credit card balances and overall consumer finance balances rose in the fourth quarter, which rules out any systemic decrease in credit use.

So if consumers are still spending and still using credit, why, and where, is BNPL stalling?

Younger Shoppers Pass on BNPL

BNPL’s slide is continuing into 2026. In January, only 12% of consumers said they made a purchase with BNPL in the previous three months, even though that window still captures the peak holiday period. This is the lowest level we have recorded since launching our Pay Later surveys in April 2025.

A closer look at the data reveals that younger consumers are responsible for BNPL’s fading numbers. In January, 15% of Gen Z shoppers had used BNPL in the previous three months, down from 21% in December 2025. For millennials, adoption dropped to 19% in January from 25% last December. For each group (and also for bridge millennials, the crossover generation of older millennials and younger Gen X) January’s level is the lowest seen so far in our 11-month study. Conversely, BNPL uptake climbed for baby boomers and held steady for Gen X.

BNPL adoption remains the highest among consumers living paycheck to paycheck and struggling to make ends meet. This suggests that inability to get credit approval for BNPL purchases is not the main reason fewer young shoppers are checking out with BNPL, although it’s probably a factor.

Lee Brading, the CFO of Sezzle, said during a recent earnings call, “We also usually tighten up the underwriting during the holiday season as we don’t want our consumer to overextend and thus become a former Sezzle user.”

For major BNPL players, the category still looks healthy. But the growth story they’re telling investors is more about active accounts, repeat usage and merchant adoption, metrics that don’t directly equal recent BNPL purchases.

Critically, all the BNPL providers mentioned below (excluding PayPal) define “active” users as having made a transaction or “used” their account in the last 12 months. That’s a far cry from our survey that asks whether consumers made a purchase in the last three months.

Affirm said in its latest quarterly reporting that the number of active consumers increased 23% year over year to 25.8 million, while transactions per active consumer rose 20% to 6.4, a sign that engagement is rising alongside the user base. Affirm also reported active merchants up 42%, to 478,000. Klarna reported ending 2025 with 118 million active consumers, up 28% year over year, alongside 966,000 merchants, up 42%. Sezzle cited 12% year-on-year active user growth and repeat usage rates of 97% in its latest earnings presentation.

PayPal, meanwhile, didn’t reveal specific BNPL user or account growth figures in its latest earnings call but did say that BNPL volume grew 23%, and in a mid-2025 earnings call that BNPL monthly active accounts climbed 18% in the quarter. That “monthly active” count reflects users who completed a transaction during this window, making it a much more tangible sign of growth—but PayPal is the industry’s 900-pound gorilla.

Next BNPL Battleground

Another complication is the arrival of provider-branded cards that look like credit cards but work like BNPL. The practical effect of these products is a fuzzier line between BNPL, cards and digital wallets, making “BNPL adoption” an evolving concept.

The Klarna Card, for example, is pitched as “debit by default,” but it also lets users “plan a purchase” and choose installment-style options inside the Klarna app, while working anywhere Visa is accepted. Affirm is taking a similar approach with the Affirm Card, also on the Visa network, with users choosing to pay in full or request to pay over time through the app. PayPal has its own version of “BNPL without the BNPL button,” offering a Pay Later in-store flow through a single-use virtual card that can be added to Apple or Google Wallet after approval.

All of these products are built for apps or digital wallets. That makes this next-generation BNPL landscape the new—and likely final— battleground for providers to win back the younger consumers who have begun to lose interest in traditional BNPL offerings.