Consumer advocates have long criticized buy now, pay later companies for encouraging people to spend more money than they can afford, but in a Jan. 13 interview, American Fintech Council CEO Phil Goldfeder said that it's a practical option compared to more predatory alternatives.

The use of the buy now, pay later financing option grew more during last year’s year-end holiday shopping season than in previous years, according to several surveys and studies.

The analytics firm Adobe Analytics, for example, found that U.S. consumers spent about $18.2 billion using BNPL between Nov. 1 and Dec. 31 of 2024, a 10% increase from the same time period in 2023.

Buy now, pay later companies tout their product as a less expensive alternative to credit cards. In some cases, BNPL loans don't carry interest — although they can lead to late fees — and many buy now, pay later companies offer short term loans that do accrue interest.

The Consumer Financial Protection Bureau in July finalized an interpretive rule that would treat buy now, pay later loans like credit card transactions. The rule requires BNPL players to provide refunds for returns, investigate customer disputes and provide billing statements.

Goldfeder, whose firm lobbies on behalf of the industry, discussed what makes BNPL an appealing option, and why consumers are increasingly choosing it to pay for goods and services.

Editor's note: This interview has been edited for clarity and brevity

Payments Dive: Why do you think more people are using buy now, pay later options?

Phil Goldfeder: Across the country we're seeing consumers embrace innovative financial tools as an alternative to traditional products that historically have not provided the best options. Buy now, pay later, we once called it an emerging industry. I argue today that it's emerged.

We're starting to see not only consumers utilize the product, but more importantly, consumers with positive experiences are coming back. When it comes to financial services, it's not about promoting one product or another, it's about creating optionality and providing consumers with enough information to make the best choice.

What makes you think buy now, pay later is here to stay?

If you look at what credit cards were to American consumers in the 1950s, I would argue that it was a new innovative tool at the time. Buy now, pay later is the innovation of today that is providing consumers with a safe and responsible alternative. It's about making sure you're meeting with consumers where they are. Consumers are looking for safe affordable financial options and buy now, pay later is providing that in a way that they aren't getting anywhere else.

Can you go into a bit more detail about BNPL's appeal to consumers?

When I'm about to make any purchase, I think through my best options. How can I make the most responsible choice for long-term stability of the financial ecosystem, but also for my own financial well-being? I'll give you an example: my wife and I just purchased a new mattress. Could I pay for it in cash? Could I put it on my credit card? I found myself utilizing buy now, pay later. It was transparent, it was clear and everything was disclosed up front.

It seems like more merchants are offering BNPL compared to a few years ago. Does that have anything to do with consumers using it in greater numbers?

I would flip that around. More and more merchants are offering buy now, pay later because that's what consumers are asking for. Ultimately, innovation in financial services stems from consumers' demand for more accessible, safe and reliable financial options. Financial service providers and retail stores are recognizing that and implementing changes.

Critics of BNPL might say that it encourages consumers to pile on debt. How do you respond to that?

Consumers that are going to make purchases or utilize BNPL are likely going to utilize other financial tools that aren't as safe or affordable [if they don't have buy now, pay later options]. It's difficult for me to comment except to say that BNPL is creating an alternative option to predatory loans or pawn shops.

Any other thoughts on buy now, pay later?

You're already seeing a shift from traditional financial services providers to mimic the products that are being offered by BNPL companies. Large financial institutions recognize that consumers are utilizing this tool and are embracing it and implementing it for their consumers. I think there is going to be a shift. You're seeing [BNPL] companies like Affirm, who continue to partner with more retailers across the country, which is increasing their customer base and repeat consumers. That shift is not going away any time soon.