And here we meet buy now, pay later (BNPL). You might have read headlines or seen something online or on television, but it is now coming under more scrutiny. Why? Because – like credit cards, mortgages, and student loans – it is a form of consumer debt, or personal debts owed due to purchasing goods that are used for individual or household consumption. And, as a form of consumer debt, BNPL users’ experiences aren’t always positive. Of course, this type of borrowing isn’t inherently bad but a financial tool that needs to be used responsibly.

If you’re not yet acquainted with BNPL, it’s relatively straightforward. Customers can use it to stagger payments for their purchases, often without paying interest or any upfront charges.

Flexibility is the key word here: BNPL gives shoppers more choices when making a payment – as they can decide how and when they pay for something based on their spending power. It’s this flexibility that is helping to fuel its growth. One thing is clear: consumers like it. Our own research shows that BNPL adoption is snowballing, while other studies show that increase is especially prevalent among younger consumers.

Another key driver is the fact that most short-term consumer debt (like credit cards) are considered a suboptimal form of financing due to the high interest rates that are charged on the debt, whereas BNPL providers often don’t charge interest at all. And this adoption is also being driven by increasing awareness as more retailers offer and market it as a payment tool.