Buy Now, Pay Later Platforms See Record Holiday Boom, Drawing Scrutiny From Lawmakers
Buy now, pay later providers saw record-setting sales growth over the November shopping holidays as consumers rely increasingly on deferred payments to combat the pain of lingering inflation.
According to holiday shopping data collected by Adobe, the sector raked in a whopping $10.1 billion between Nov. 1 and Dec. 1, a 9 percent increase from 2024. The firm’s business services arm forecasted that by the end of this year, that number will double. Between Nov. 1 and Dec. 31, shoppers are projected to spend $20.2 billion using buy now, pay later tools—an 11 percent jump from last year.
That trend holds true for Sweden-based flexible payments provider Klarna, which announced previously unseen growth in the United States this week. Gross merchandise volume grew 45 percent year over year for the period between Nov. 1 and Black Friday on Nov. 28.
According to the group, growth was up across categories, though footwear, technology, beauty and home goods resonated strongly with American consumers. Notably, Birkenstock—which ranked low last year in Klarna sales—made a “dramatic leap” in 2025, overtaking all other brands to claim to No. 1 spot for adult footwear, followed by Timberland.
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Meanwhile, Block, the owner of Afterpay, Square and Cash App, reported a 10 percent year-over-year increase in transactions across all its brands from the Black Friday-Cyber Monday weekend last year. The payments providers collectively processed 124 million purchases over the four-day period, with a trend toward local spending taking shape across much of the U.S.
About 49.8 million consumers paid using Afterpay, Square and Cash App, and they hit up a total of 1.3 million businesses, the group said. Deferred payment plans proved very popular with shoppers, with average basket sizes for Afterpay growing 10 percent year over year. The company said that indicates shoppers are buying more items per transaction than they did in 2024, while spend per customer grew by an average of 6 percent.
While the top trending retail products included fashion goods like shirts and tops, shoes and pants, spending on services saw the biggest gains, growing 91 percent from the same period in 2024, hinting that higher prices at retail (or shallower discounts) may have inhibited shoppers from spending to their full potential on goods. Travel and experiences payments grew 13 percent year over year.
Not everyone is happy about the growing trend toward deferred payments, as economic experts believe they pose long-term risks to consumers’ financial health.
Seven state attorneys general from North Carolina, California, Connecticut, Colorado, Illinois, Minnesota and Wisconsin launched a joint inquiry into buy now, pay later providers like Affirm, Klarna, Afterpay, PayPal, Sezzle and Zip this week, targeting the companies with a letter asking them how they assess consumers’ ability to repay the loans they’re doling out.
“Buy-Now-Pay-Later loans may seem simple and safe, but they can lead to surprise fees and growing debt,” North Carolina Attorney General Jeff Jackson said. “Laws exist to protect North Carolinians from predatory lenders, and we are going to make sure these lenders are following the law.”
Jackson’s office said it’s concerned about the meteoric growth of the industry and the fact that shoppers are becoming increasingly reliant on deferred payments for everyday purchases including groceries.
Connecticut Attorney General William Tong said that while these options appear to be convenient, especially during the holiday season, “shoppers need to watch out for debt traps.”
“We’re asking the six largest buy-now-pay-later lenders for detailed information on their costs and fees, their disclosures, how they vet their customers’ abilities to pay, among other questions,” he said. “As Trump rescinds critical protections for buy-now-pay-later consumers, it’s up to states now to ensure shoppers know what they are getting into, and to ensure these companies are held accountable.”
In May of this year, the Consumer Financial Protection Bureau (CFPB) under President Donald Trump rolled back a Biden-era rule that aimed to extend similar consumer protections seen for credit cards to buy now, pay later services.
Congress, too, has begun to heavily scrutinize the industry.
In mid-November, the Senate Banking, Housing, and Urban Affairs Committee led by Ranking Member Senator Elizabeth Warren (D-Mass.), along with Senators Richard Blumenthal (D-Conn.), Cory Booker (D-N.J.), Tammy Duckworth (D-Ill.), and Mazie Hirono (D-Hawaii) also sent letters to the major buy now, pay later providers asking for data about the risks and economic impact of their products.
“BNPL loans are becoming increasingly common with consumers, with up to half of Americans having used a BNPL loan,” they wrote.
According to Congressional data, consumers with buy now, pay later loans have on average $871 more in credit card debt in the month of the loan’s origination than consumers who didn’t take out loans. “This could suggest that consumers are turning to BNPL when their other sources of credit are less available—and may be taking on debt they cannot afford,” the lawmakers surmised. Without protections from the CFPB that classified buy now, pay later lenders as creditors, consumers are operating in dangerous territory, they added.
The issue may come to ahead before the holiday season is over. The Senators called for the companies to turn over the data on their products, users and their role in the broader economy by Dec. 9.
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