The news: PayPal’s Pay Later is soaring in popularity, with 56% of US buy now, pay later (BNPL) customers having used its installment services—outstripping industry leaders Klarna, Affirm, and Afterpay, per a Lending Tree survey.

How we got here: BNPL is changing how US consumers shop and creating a new growth engine for payments companies. Nearly two-thirds (64%) of Gen Zers claim to have used installment loans for a purchase—including 16% of Gen Zers who’ve used them six or more times. 

Gen Zers and parents of young children are far more likely to hold multiple BNPL loans simultaneously. 71% of 18- to 28-year-olds reported holding three or more BNPL at once, and two-thirds of parents say the same.

PayPal’s disruption: BNPL payment providers are reaping the reward of these shifts. Until recently, Affirm, Klarna, and Afterpay were the US BNPL front runners. PayPal’s explosive launch onto the scene has shaken that distinction, with its Q3 2025 BNPL volume growing 20% YoY and total 2025 BNPL volume expected to crack $40 billion—well within reach of current industry leader Affirm’s volume, per our forecast, at $35.69 billion.

PayPal’s success likely is linked to its broad acceptance network, outpacing competitors still trying to get embedded at checkout. It could get an even greater advantage over the holidays—it’s offering 5% cash back for in-store and ecommerce BNPL sales—blowing Affirm’s 0% interest or Klarna’s subscription-based rewards and Nift gifts out of the water.

Our take: PayPal’s dominance is likely to stick unless BNPL competitors can expand their offerings' acceptance at the point of sale. Continuing to push BNPL-enabled debit cards and merchant partnerships may help to secure loyalty from Gen Zers and young parents seeking these financing options.