Our take: Buy now, pay later (BNPL) reached new heights in 2021 as consumers embraced flexible payments and looked to limit credit card use—the number of US BNPL users increased 81.2% year over year (YoY) in 2021, per Insider Intelligence forecasts.

Here are five things that shook up the BNPL space this year:

1. Block (formerly Square) announced plans to acquire Afterpay. Block announced the $29 billion deal in early August. The acquisition has yet to close, but when it does, it should position Block for significant growth and help it keep up with PayPal, which launched its own BNPL solution in the US in August 2020. Block could tap into Afterpay’s network of merchants and roughly 12.7 million customers, per our forecasts, to attract new business and expand its proprietary seller tools.
2. Amazon tapped Affirm to offer BNPL. The etailer partnered with the US-based BNPL provider in late August to let customers split purchases of $50 or more into monthly installments. The tie-up is Amazon’s first direct BNPL partnership in the US and lets it offer a payment tool that customers value.
3. Major banks pursued flexible payment solutions. Capital One and US Bank are among the big issuers that either launched or announced plans to offer flexible payment solutions in 2021. Because BNPL incumbents like Afterpay and Klarna offer interest-free alternatives to credit cards, issuers increased their competitive offenses to keep customers tied to their business and to sustain volume.
4. Klarna unveiled its super app. The app consolidates shopping, payment management, and support for products, delivery, and returns. As BNPL competition heats up, Klarna’s super app can help it stand out and drive user and revenue growth by transforming it from a BNPL provider into a one-stop hub that can support the entire consumer shopping and payments journey. Klarna said it will add other features to the app, which should help increase customer appeal.
5. BNPL providers pushed for differentiation. Major acquisitions throughout 2021—like Klarna purchasing social shopping startup HERO and discount shopping platform Stocard—brought new consumer offerings to help providers stand out. Many brands also rolled out more merchant offerings to increase their value propositions and capture more retail business: For instance, in August, Afterpay unveiled a merchant analytics platform to give retailers a clearer picture of things like marketing performance, omnichannel retail volumes, and customer demographics.