BNPL Usage Surged During Q1 as Middle-Income Shoppers Increased Adoption

Why It Matters

The expansion signals BNPL’s transition from a niche financing tool to a mainstream consumer‑spending channel, reshaping retail strategies and credit‑risk dynamics across income tiers.

Key Takeaways

• Klarna GMV $33.7B, up 33% YoY; Affirm GMV $11.6B, up 35%.
• Middle‑income households ($40k‑$150k) drove a surge in BNPL adoption.
• 0% APR “Big Nothing” sale lifted cart size 50% to $712.
• Delinquency rates stay low (~2.8% for Affirm, declining for Klarna).

Pulse Analysis

The buy‑now‑pay‑later market entered a new growth phase in Q1, propelled by both Klarna and Affirm posting double‑digit GMV gains. Klarna’s $33.7 billion volume and Affirm’s $11.6 billion reflect a broader shift among middle‑income consumers, who now see BNPL as a budgeting tool rather than a high‑risk credit product. This demographic, earning between $40,000 and $150,000, is expanding the user base beyond traditionally low‑income shoppers, creating a more diversified revenue stream for providers and prompting retailers to integrate BNPL options at checkout.

Promotional tactics are amplifying the trend. Affirm’s three‑day “The Big Nothing” campaign offered 0% APR across thousands of brands, driving a 35% sales lift over its October launch and pushing average cart values to $712—half again as high as before. The event also generated a 70% increase in merchant‑funded offers, underscoring how zero‑interest incentives can accelerate conversion. Meanwhile, the industry sees users juggling multiple BNPL services; 20% now employ three or more platforms, up from 12% five years ago, prompting firms to roll out physical cards and broaden in‑store presence.

However, the rapid adoption raises credit‑risk questions. While BNPL delinquency rates hover around 2.8% for Affirm and are declining for Klarna, broader consumer debt is climbing, with average credit‑card balances reaching $6,715. Analysts warn that sustained reliance on short‑term financing could strain households if economic conditions worsen. BNPL providers are countering with sophisticated underwriting that leverages transaction‑level data, but the sector’s long‑term health will depend on balancing growth with responsible credit practices.