Klarna: 96% of Black Friday Buy Now, Pay Later Purchases Paid Off

Jennifer Bringle
·3 min read

Buy now, pay later financing has become a popular alternative to credit cards or loans for consumers making larger purchases. And according to a new report from buy now, pay later service Klarna, those consumers are paying off those purchases at a faster rate than typical credit.

The company found that 96 percent of purchases made during the 2023 Black Friday weekend in the United States were paid on time or early. Thirty percent of those shoppers paid off their holiday shopping prior to the deadline, up from 24 percent in 2022.

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Klarna saw a 30 percent increase in Black Friday buying in 2023 compared to the prior year. The company also saw its users grow 32 percent last year over 2022, with shoppers age 50 and up as its fastest-growing consumer group.

“This data clearly shows that consumers understand Klarna’s buy now, pay later products, underscoring the growing demand for buy now, pay later services and the effectiveness of our buy now, pay later model, while also demonstrating the financial prudence of our 37 million U.S. consumers who are looking for financial flexibility without compromising their financial health,” said Erin Jaeger, head of North America, Klarna.

Klarna, and other buy now, pay later services such as Afterpay, Affirm and Splitit, offer consumers a way to finance purchases—typically those with a higher price point—in installments without paying interest. According to financial services company FIS’ Global Payments Report 2023, buy now, pay later accounted for 5 percent of global e-commerce transaction volume in 2022. And that growth is expected to continue to expand at a compound annual growth rate of 16 percent between 2022 and 2026.

According to Statista, PayPal’s “Pay in 4” buy now, pay later program is the most popular option in the U.S., followed by Afterpay, Affirm and Klarna. A study conducted last fall by Splitit/PYMNTS found that 60 percent of shoppers had used some type of installment payment plan last year, with 72 percent of Millennials doing so.

Credit card balances contribute to a significant portion of consumer debt, according to the quarterly household debt and credit report from the Federal Reserve Bank of New York. The report found that credit card balances increase by $50 billion to $1.13 trillion during the fourth quarter of 2023.

And those balances cost consumers more than just the price of purchase. The Consumer Financial Protection Bureau’s biennial report to Congress on the consumer credit card market found that credit card companies charged consumers more than $105 billion in interest and $25 billion in fees during 2022.

“Klarna’s products are not built on encouraging people to borrow as much as possible at the highest possible rate like credit card providers,” Jaeger said. “When it makes sense to use credit, our interest-free BNPL product, with short-term repayments and no revolving credit, presents a fairer, more sustainable choice. This approach results in our users maintaining an average balance of $150, far below the $6,000 often seen with credit cards.”

Most buy now, pay later services such as Klarna don’t charge interest or fees when consumers pay their installments on time. Klarna charges a $7 late fee for payments made after a 10-day grace period, but late fees will never exceed 25 percent of the total purchase amount. Klarna also makes lending decisions based on whether a user has current missed payments to prevent the customer from getting further into debt. Most buy now, pay later options have similar terms.

Klarna said those policies, coupled with its lending model, have allowed the company to keep its global default rate below 1 percent, 30-40 percent lower than most credit card companies.