Trendspotting: Buy now, pay later (BNPL) products aimed at helping consumers pay for necessities are becoming increasingly popular as the rising cost of living wears away at consumers’ budgets.

• Rent: US companies like Till, Jetty, and Flex and Canada-based Zenbase let renters split payments into installments. Some work directly with tenants to help them pay their rent and can charge additional fees.
• Food: Deliveroo and Klarna partnered so customers can pay for carryout and groceries using BNPL. And politicians slammed British supermarket Iceland for its BNPL offering, which it claimed would help shoppers during the cost of living crisis.

Consumers have also expressed interest in even broader BNPL use cases:

• Healthcare: 42% of US consumers said they’d use BNPL to pay for medicine and prescriptions, according to a Pymnts report.
• Education: And 38% said they’d pay for education and certifications with BNPL, per Pymnts.
• Holiday shopping: Another 40% of US consumers plan to pay for gifts using BNPL, per a Bluedot survey. And almost half of Gen Z shoppers (48%) said they planned to use BNPL over the holidays.

Why it could work: By 2026, almost 40% of US internet users will use BNPL, per Insider Intelligence forecasts—a surge in popularity echoed worldwide.

• As it grows and providers diversify for growth, the mix is shifting: Apparel and beauty merchants’ combined share of BNPL volume has dropped from 80% in 2019 to around 59% last year, per the Consumer Financial Protection Bureau (CFPB)—which we expect to continue.
• Stubborn inflation and fears of global recessions could also fuel BNPL’s growth as consumers look for novel ways to extend their buying power and cover expenses.

What’s the risk?

• Debt: However you spin it, BNPL is adding to consumers’ debts. That can exacerbate shoppers’ financial woes by normalizing unsustainable borrowing. And as the economic picture darkens, BNPL providers may also struggle to get those loans back as the likelihood of customers defaulting jumps.
• No regulation: There’s little oversight tailored to BNPL platforms. And although regulation appears to be on the way in both the US and the UK, its absence leaves customers exposed and unprotected.
• Reputational damage: Companies targeting consumers who struggle to pay for food or housing without taking on debt open themselves up to accusations that they’re exploiting the financially vulnerable. Even if they market it as helping shoppers, BNPL firms need to be careful to avoid permanently damaging their brands.

Keep reading: Check out our US Buy Now, Pay Later Forecast for more on BNPL's projected growth.

This article originally appeared in Insider Intelligence's Payments Innovation Briefing—a daily recap of top stories reshaping the payments industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.

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