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The Year Ahead

Buy Now, Pay Later Puts a New Twist on Consumer Debt

Online apps that let consumers pay in installments avoid some of plastic’s pitfalls while creating new risks.
relates to Buy Now, Pay Later Puts a New Twist on Consumer Debt

Illustration: Angela Stempel for Bloomberg Businessweek

Buy now, pay later is coming soon to a store near you—if it’s not there already. Mobile apps from companies including Afterpay Ltd. and Klarna Bank AB that let consumers purchase goods on installment plans exploded worldwide last year. Retailers from Macy’s Inc. to Forever 21 Inc. have also been adding the option at checkout in brick-and-mortar stores.

Unlike the layaway installment plans of old, the new ones are effectively short-term loans that allow consumers to take their purchases home immediately. They’re popular among the credit-card-wary, especially younger consumers. In the U.S., the number of people who’ve tried them has climbed 300% every year since 2018. American Eagle, Big Lots, and Southwest Airlines have recently credited them with boosting their sales. “I definitely think that 2022 will be the year that buy now, pay later certainly goes mainstream,” says Nick Molnar, co-chief executive officer of Afterpay. David Sykes, head of U.S. business for Sweden’s Klarna, is even more optimistic: “By the end of this year, you’re not going to have a major retailer that’s not offering buy now, pay later.”