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Buy Now Pay Later with Gen Z: Fintech Trends for Gen Z

By Joanna Hanner | Senior Manager Payments Products, Payment Services, Discover Global Network

When today’s consumers pay for their new couch or outfit, they don’t even need to reach for their wallet—and not just because they’re tapping their smartphones or paying in-app. Instead, the consumer lending solution known as Buy Now, Pay Later (BNPL) is surging—and like many trends in payments these days, Gen Z is propelling the shift toward this payment alternative.

Given its rising popularity with Gen Z, both merchants and payment providers are increasingly eager to provide BNPL payment methods to this vibrant demographic.

BNPL benefits consumers and merchants alike

There’s little doubt why. As a payment alternative, BNPL is growing in popularity in global markets, especially among digital shoppers. The number of unique digital BNPL and flexible credit users is forecast to reach almost 1 billion in 2027, up from 447 million in 2022.¹ Meanwhile, BNPL and flexible credit transactions are expected to reach 10.5 billion globally, surging from 1.8 billion transactions in 2022.¹

The surge in these programs stems from a confluence of earlier trends. BNPL is a financing option that has evolved from “lay-away” type programs of the past. But instead of leaving the merchandise at the store until all the payments are made, the consumer can walk away with it after the first payment.

Often approved through a streamlined application process directly at the point of sale or online, consumers are increasingly attracted by the offering’s ease and convenience. BNPL loans typically split the purchase price into a series of smaller payments, allowing consumers to make more predictable payments for a fixed set of months.

Gen Z consumer shopping on mobile

Gen Z shoppers, who generally have less disposable income than older groups, find BNPL especially appealing as an easy budgeting tool. A recent study shows that 40% of Gen Z shoppers used a BNPL solution or installment loan over the past 90 days.² They enjoy being able to take home their merchandise, often without accumulating interest and, depending on the program, without relying on access to available credit.

These programs benefit retailers as well, since they can advertise interest-free installments as special pricing offers for shoppers—welcome features during times of financial uncertainty. In fact, merchants are often quick to absorb the associated borrowing costs to promote BNPL as “free” financing solutions for customers.

Younger demographics have gravitated to BNPL

With a growing number of merchants seeking to incorporate BNPL into their checkout options, those targeting younger demographics will find it particularly useful. The option to divide purchases into flexible installments allows these customers to make smaller purchases, as well as bigger-ticket items, without affecting their day-to-day budgets. As a result, offering BNPL can lead to increased visits and decreased cart abandonment.

Research shows that BNPL is popular with younger populations because it offers both predictable financial flexibility and simpler borrowing terms. In fact, many solutions offer lower interest rates than traditional credit cards. In addition, BNPL appeals to this demographic’s general desire for instant gratification.

Gen Z consumers are more open to payment and financing alternatives than any other generation of shoppers.² Merchants need to be prepared to offer payment capabilities and trending options quickly to capture brand loyalty from the Gen Z demographic.

Bringing merchants and consumers new payment options

Here at Discover,® we’re always looking for new ways to offer payment flexibility to consumers and merchants. In our view, BNPL is a great option: It fits with our belief in financial inclusivity, and it directly supports our mission to help people spend smarter, manage debt better and save more money so they can achieve a brighter financial future.

As with any borrowing facility, consumers should ensure that they borrow responsibly and never more than they can afford. It’s important that they understand the cost of possible late fees and the potential impact on their credit scores. When part of a well-considered financial plan, consumers are finding that BNPL can play a valuable role in encouraging financially responsible borrowing.

For payment providers and merchants, it’s also vital to consider BNPL’s role as just one of a growing set of payment options, each of which can be profitably integrated into their payments ecosystem. As BNPL continues to grow in popularity, it represents an increasingly important opportunity for retailers—especially those eager to appeal to a younger segment of consumers.

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  1. Juniper Research Limited, August 2022. “Buy Now Pay Later: Regulatory Framework, Competitor Leaderboard & Market Forecasts 2022-2027.”
  2. Javelin Strategy & Research, January 2023. “Gen Z is Reaching Adulthood and Merchant Service Providers Need a Plan.”   


The information provided herein is sponsored by Discover® Global Network. It is intended for informational purposes, and is not intended as a substitute for professional advice.