A J.D. Power consumer survey found that members of Gen Z were more apt to use buy now, pay later than credit cards in what that firm said was a first-time poll result.

The analytics firm surveyed roughly 4,300 U.S. consumers, including roughly 1,000 Gen Z members,  about their spending habits for all of 2024, and specifically for the 2024 holiday shopping season. For the holidays, 54% of Gen Z said they used BNPL during that time period, and 50% said they used credit cards. It was the first J.D. Power survey to show that BNPL overtook credit card use among that demographic, a Thursday news release said.

The result was not completely unexpected, said Sean Gelles, senior director of payments intelligence for J.D. Power. "These products are meeting a need that is not being met by the existing products in the marketplace," he said.

For the full year, 44% of Gen Z said they used buy now, pay later in 2024, compared to 50% who said they used credit cards.

Among all consumers surveyed, 32% said they used buy now, pay later in 2024, a 4 percentage points increase compared to 2023, while credit card use among all survey respondents dropped 6 percentage points to 61% in 2024, compared to 2023.

It isn't time for traditional financial institutions to start panicking, at least not yet, Gelles said, noting that banks and credit card networks have started to get in on the BNPL game.

"You can't really generalize and say Gen Z are using buy now, pay later, more than credit cards," he said. "But you can say that during the holiday shopping season, when you have this big spike in spending, a higher percentage of Gen Zers say they use buy now, pay later at the point of sale than their actual physical credit card."

Buy now, pay later companies enjoy high satisfaction rates among consumers, but legacy banks and credit card networks still have generally higher marks, he said.

American Express and JPMorgan Chase --- which offer card-based buy now, pay later products --- received the highest marks from consumers surveyed by J.D. Power, Gelles noted.

Klarna's BNPL product was the highest rated among buy now, pay later companies, placing it fourth behind Citi Flex Pay, that bank’s BNPL offering. 

"They need to make sure they continue to deliver the best customer experiences," Gelles said of banks and credit card companies