Deferred payment schemes have been around for a long time — making purchases “on time” or placing items on layaway goes back well beyond our great-grandparents’ time. In recent decades, no-interest promotions on credit cards have been a reliable driver of sales, and retailers like Home Depot and Walmart have offered the option of splitting a large purchase into manageable payments.
Modern buy now, pay later (BNPL) plans are a logical evolution of that tradition. Offered by fintechs and payment processors like Paypal, Afterpay, and Affirm, they’re a simple and straightforward option for consumers to enjoy the same convenience on relatively small purchases. Even delivery services like Uber Eats and DoorDash now offer BNPL options. The predictable consequence of this is that BNPL debt has become an issue both for unwary consumers and for the collections industry as a whole. In this article, we’ll dive into a handful of BNPL’s most notable impacts.
1. BNPL Debt Disproportionately Affects Those Least Able to Pay
A foundational aspect of BNPL’s impact on the collections industry relates to those who use it. Part of the appeal of BNPL is that credit checks are minimal at best, making this form of quasi-credit available to those who are less able to take advantage of conventional credit offerings. This includes the unbanked and underbanked, who, according to the most recent FDIC survey, account for almost 1 in 5 American households (at 4.2% and 14.2% of the population, respectively, for a total of 18.4%).
An economic brief released by the Richmond Fed in January of 2025 found that typical BNPL users tended to be younger and less educated, with relatively high levels of debt and low credit scores. They are, in short, precisely the class of consumers most likely to become delinquent. Although delinquency rates for BNPL overall are low, those who do miss payments on their BNPL purchases are most likely to fall within this demographic. They are also likely to use other forms of alternative loans, from specialized fintech offerings to conventional payday loans and similar vehicles.
2. BNPL is Growing Rapidly
The brief from the Richmond Fed tracked the growth in BNPL purchases from 16.9 million in 2019 to 180 million in 2021, across just the five largest providers, with the dollar value of those purchases growing from $2 billion to $24.2 billion. That figure was projected to top $132 billion in 2024, and over $205 billion by 2029.
This rapid growth, coupled with the prevalence of high-risk consumers within the BNPL portfolio, creates a likelihood that BNPL debt will form an increasing part of the collections industry’s overall business.
3. BNPL Defaulters Represent a Less-Than-Ideal Block of Business
At its core, the collections industry is a business like any other, with a keen eye on bottom-line profit and ROI. For agencies closely monitoring their collection efficiency, prioritizing the pursuit of high-dollar, low-risk debtors makes perfect sense — collecting larger dollar amounts from those with greater resources offers better returns on a given expenditure of financial and staffing resources.
As of 2022 (data for more recent years is still sparse), the CFPB placed the average BNPL purchase at just $142 and the median even lower at $108. The industry, then, is facing a fast-rising volume of low-dollar purchases, made largely by those with limited resources for repayment. This is not an ideal scenario, given the industry’s already well-documented issues with recruitment and staff retention.
4. BNPL Users Are Tough to Track Via Conventional Data Sources
One of the attractions of BNPL for its users is that providers do not, on the whole, furnish negative reporting to the credit reporting agencies (although BNPL providers like Affirm, Afterpay, and Klarna are beginning to send negative reporting to credit bureaus). This is problematic for the debt industry in two ways. One is that it impacts risk modeling for both first- and third-party creditors by partially obscuring the potential borrower’s true debt position.
For first-party vendors, this increases the risk of offering BNPL to a customer, which is exacerbated by the fact that it is largely vendor fees that cover BNPL providers’ costs. For third-party debt collections, it thwarts efforts at segmenting a portfolio by triaging those most likely to pay.
A more fundamental issue is that the information used to track delinquent debtors (skip tracing) is largely drawn from credit headers. The legacy data providers who draw on those headers have minimal access at best to information on the unbanked and underbanked, and the lack of comprehensive reporting on delinquent BNPL payments through the major credit bureaus is an unwelcome stumbling block in what is already a low-reward segment of the debt market.
5. Consumers Appear to Prioritize BNPL Debt
That said, the news regarding BNPL debt is not entirely bad. As a rapidly growing segment of the market, it represents a significant source of potential revenue if it can be tapped in a cost-effective manner. It’s also worth noting that, because of its inherent difficulties and low dollar amounts per debtor, some agencies may be reluctant to enter or prioritize that market segment, creating opportunity for competitors to aggressively pursue that niche.
Further, data from the Richmond Fed’s brief suggests that for various reasons, consumers seem to prioritize making their BNPL payments over more conventional forms of debt. This may be due to the relatively small dollar amounts involved, which makes repayments less difficult to manage. It could also be that BNPL programs are inherently structured in a way that encourages repeat usage (which, in turn, requires the account to be kept current). Regardless of the reason or reasons for an individual debtor’s priorities, this represents a positive note for collections professionals.
6. Improved Data Sources Will be Crucial to BNPL Collections
All of these data points lead inexorably to a growing need for improved, flexible consumer intelligence sources to complement existing legacy providers. Conventional data drawn from credit headers is of minimal use with the unbanked and underbanked. Even among those with access to the conventional financial system, the young users who make up a large percentage of BNPL debtors are difficult subjects for skip tracing. Young people, in general, are more likely to move frequently and to share housing and utilities. Even their telephones and credit cards may be connected to a family member’s account rather than under their own name.
A nimble, modern intelligence tool like Spokeo for Business is much more capable of providing current, actionable contact information for BNPL debtors than legacy data products. Spokeo searches pull from billions of data points generated from regulated and open sources, and most notably from social media (a specific area of strength for Spokeo, which originally began as a social-media aggregation tool).
Spokeo’s quick results, easy-to-use interface, and powerful dashboard tools for management make it an exceptional tool for exactly this kind of skip tracing, which demands fast results with a minimal expenditure of time and staffing. In fact, agencies with the appropriate IT skills in-house – or through existing relationships with consultants – can perform automated bulk searches of Spokeo’s open-source data, using the product’s powerful application programming interface (API). Whether done manually or (especially) through the API, this goes a long way toward making the pursuit of BNPL debt cost-effective for collections professionals.
BNPL’s Constraints Require Creative Approaches
Collecting an Affirm late payment is the same in theory as collecting on a delinquent car loan, but in practice, the constraints discussed here make the former more challenging than the latter. Collecting cost-effectively on these ephemeral, high-volume, low-dollar accounts requires creativity, and better data is the key to that creativity.
Spokeo for Business can provide the data your agency needs in order to compete successfully in the BNPL debt market. Spokeo searches can provide up-to-date addresses, previously unknown emails, and phone numbers for contact purposes, and even draw connections between the debtor and friends or family members who can help make a connection. These younger consumers respond well to contact through email or text, appreciate self-service options through an app or online portal, and are (as previously mentioned) predisposed to prioritize BNPL payments over other debt. With Spokeo providing the data you need to make those contacts reliably, you’ll be well-positioned to profit from what would otherwise be a difficult line of business.
To learn more about how you can use Spokeo to turbocharge your collections process, see a demonstration of the product, or arrange a no-cost trial of Spokeo for Business at your agency, reach out to our team through the contact information on our Collections and Skip Tracing page.
Sources
Klarna: How to Pay With Klarna at Uber Eats
US Federal Deposit Insurance Corporation: 2023 FDIC National Survey of Unbanked and Underbanked Households
Federal Reserve Bank of Richmond: Buy Now, Pay Later: Market Impact and Policy Considerations
Research and Markets: United States Buy Now Pay Later Business Report 2024
US Consumer Financial Protection Bureau: Consumer Use of Buy Now, Pay Later and Other Unsecured Debt