For most of 2021 and 2022, the U.S. buy-now-pay-later category was a venture-funded gold rush. Affirm, Klarna, Afterpay (now part of Block), Sezzle, Zip, and a long tail of smaller names pursued growth at almost any acquisition cost, with merchant economics that did not pencil out, default rates that nobody knew how to model through a downturn, and a regulatory framework that did not yet exist. Three years later the picture has consolidated. According to CFPB aggregate filings, U.S. BNPL transaction volume reached $114 billion in 2025, up from $52 billion in 2022, with five players now accounting for about 91 percent of the volume. The story of BNPL systems in the U.S. is no longer about who is winning the land grab. It is about which of the players survived the underwriting test and the regulatory test at once.
The volume picture, more granularly
The composition of the $114 billion is concentrated. Affirm processed about $34 billion in 2025, Klarna $28 billion, Afterpay $19 billion, PayPal Pay Later $17 billion, and Sezzle $5 billion. The long tail of smaller players (Zip, Splitit, Bread, others) processed about $11 billion combined. The five major names together represent 91 percent of the U.S. market, up from 76 percent in 2022. The consolidation has been driven mostly by the smaller players exiting or shrinking rather than by acquisitions; Bread was acquired by Alliance Data, but most of the other small names simply lost market share or pivoted to B2B underwriting.
The merchant categories where BNPL has grown fastest are also concentrated. Apparel and footwear represent 28 percent of U.S. BNPL volume, electronics 21 percent, home furnishings 16 percent, and travel and experiences 12 percent. Healthcare and dental have grown rapidly off a small base, accounting for about 7 percent in 2025, up from 2 percent two years earlier. The category has expanded most aggressively in larger-ticket healthcare verticals, where the average transaction size is around $1,800 versus $145 for a typical apparel purchase.
U.S. BNPL volume by provider, 2025. Sources: CFPB aggregated, issuer disclosures.What the underwriting actually looks like now
The major U.S. BNPL providers have, during 2024 and 2025, materially upgraded their underwriting models. Affirm’s default rate on its short-term zero-interest product was 2.7 percent in 2025, down from 4.1 percent in 2022. Klarna’s equivalent was 3.2 percent in the U.S., down from 4.8 percent. The improvement is partly a function of better data (the providers have built credit-relevant transaction histories on roughly 80 million U.S. consumers) and partly a function of a more disciplined approval framework after the post-2022 cohort losses.
The credit reporting picture has also changed. The CFPB initially classified BNPL providers under TILA via a May 2024 interpretive rule, which was subsequently withdrawn in 2025 under new leadership, beginning with longer-tenor instalment products and extending to short-term zero-interest products by the end of 2026. The rule has been significant for two reasons. First, it gave consumers credit-history credit for paying their BNPL plans on time, which had previously been invisible to the bureaus. Second, it gave incumbent lenders (banks, credit card issuers) visibility into customer BNPL exposure, which had previously been hidden in their underwriting data.
The profitability test the survivors passed
The strict definition of profitability for a BNPL provider is positive net income excluding share-based compensation, on a quarterly basis, for at least two consecutive quarters. Three names cleared that bar in 2025: Affirm (profitable on a GAAP basis from Q1 2024), Klarna’s U.S. segment (profitable from Q3 2024), and PayPal Pay Later (always profitable as a segment, but disclosed at the parent level). Afterpay’s segment results inside Block are now profitable on a contribution-margin basis. Sezzle reported its first profitable year in 2025.
The list of names that did not clear the bar is shorter but instructive. Zip’s U.S. operation was sold in late 2024 and the buyer has not disclosed underwriting performance. Splitit and several smaller names continued to report quarterly losses. The exits and shrinkages have left a market that looks more like a regulated consumer credit category than the venture-funded gold rush of three years earlier. The IPO of Klarna in September 2025 at roughly a $17 billion valuation, well below its 2021 peak private valuation of $46 billion, but well above the $7 billion floor floated by sceptical analysts in 2023. The IPO multiple was, in effect, a pricing signal that the U.S. market accepted BNPL as a legitimate consumer credit product but at lower margins than the venture investors had projected.
The merchant economics have also matured. The U.S. BNPL fee that merchants pay on each transaction now averages 4.2 to 5.8 percent, depending on the provider and the merchant’s vertical, against an industry baseline of 1.8 to 2.4 percent for credit card acceptance. Merchants accept the higher fee because BNPL adoption raises basket sizes by an average of 35 to 45 percent and conversion rates by 15 to 25 percent in the verticals where it is integrated effectively. The math has been closely studied during 2024 and 2025 by retail finance teams, and the consensus inside U.S. retail is that the BNPL economic premium is justified for high-consideration purchases above $200 but not for impulse purchases under $50.
That conclusion has shaped the deployment pattern. BNPL is now ubiquitous on apparel, electronics, and travel checkout flows but rare on grocery, fast food, and convenience verticals. The split has been stable for two years and is unlikely to move materially in 2026.
What the regulation actually does
The CFPB’s BNPL rulemaking, finalised in late 2024 and effective from June 2025, brought the U.S. category under the same disclosure and dispute-resolution framework that applies to credit cards under the Truth in Lending Act. Specifically, BNPL providers are now required to disclose the cost of credit (including any late fees, deferred-interest provisions, and other charges) up front in standardised format; to provide consumers with a 60-day chargeback right on disputed transactions; and to report payment behaviour to the credit bureaus. The compliance cost has been meaningful but absorbable for the larger players.
Beyond the consumer-protection layer, the OCC and the Federal Reserve formalised expectations for bank-partnership oversight on BNPL providers under existing third-party risk management guidance operating under partner-bank charters. Most U.S. BNPL providers (other than PayPal, which operates under its own banking authority) rely on a partner-bank arrangement to issue credit. The new guidance has pushed several smaller partner banks (Pathward, Sutton Bank) to reduce their BNPL partnership exposure, which has accelerated the consolidation in the smaller-provider segment.
What 2026 will probably reveal about BNPL systems in the U.S.
Three questions will shape the year. First, whether default rates hold at the 2025 level through a potential consumer-spending slowdown. The economic data through Q1 2026 has been mixed; if a recession materialises in mid-2026, the U.S. BNPL providers will face their first sustained downturn test. The major names have built reserve positions consistent with a 4 to 5 percent default rate, which gives them a cushion. Second, whether the credit-bureau reporting expansion to short-term zero-interest products lands on time. The CFPB’s stated deadline is end-2026; the bureau-side technical implementation is the bottleneck.
Third, whether at least one major U.S. credit card issuer launches a competitive BNPL product at meaningful scale. Chase and American Express have both run pilots; neither has launched at full scale. The bank-issuer entry would be the most consequential competitive development, because it would target the prime-credit segment that the major BNPL players have been moving into during 2024 and 2025. The first major bank launch will set the pricing baseline.
What will probably not happen in 2026 is a return to the 2021 mood. The category has settled into a pattern of disciplined growth, consumer-protection regulation, and consolidated competition. By the end of 2026 the question for U.S. consumers will not be whether to use BNPL as a payment option; it will be which BNPL provider is integrated into their preferred merchant flow. That is a different conversation than the one happening three years ago, and it is the one the category has finally earned.
