The Truth Behind the “Buy Now, Pay Later Bubble”: The “Invisible Debt” Risk Growing in the Shadow of the AI Bubble
“Buy Now, Pay Later (BNPL)” has dramatically changed consumer behavior in North America in just a few years. While welcomed as a convenient and easy installment payment method, industry veterans are rapidly growing wary of its explosive growth and actual usage patterns. One such person is Nigel Morris, co-founder of Capital One, who has long been well-versed in the subprime sector.
He clearly sounds the alarm. “People are buying groceries with BNPL—this is a clear sign that many are in a difficult situation,” he says. Behind this are a surging number of users, invisible debt, regulatory rollbacks, and an “eerie silence” reminiscent of 2008.
1. The Rapidly Expanding BNPL Market and the Reality of “Paying for Daily Necessities in Installments”
1-1. A 91.5 Million User Market Moving from “Relief” to “Dependency”
The number of BNPL users in the U.S. has reached 91.5 million, and 25% of them use BNPL to purchase groceries (Empower / LendingTree). BNPL, which was once used for discretionary spending like “new Apple headphones” or “designer bags,” has now permeated daily necessities.
1-2. The “Silent Crisis” of Rising Delinquency Rates
According to LendingTree, 42% experienced at least one delinquency in 2025.
2023: 34%
2024: 39%
2025: 42%
This steady upward trend is a signal indicating economic deterioration and pressure on household budgets.
2. The Blind Spot in the Financial System Created by “Invisible Debt”
2-1. “Phantom Debt” That Does Not Appear on Credit Scores
Since most BNPL services are not reported to credit bureaus, they appear as “non-existent debt” to other companies.
Morris explains it this way.
“If a consumer takes out 10 BNPL loans in a week, the lender cannot track it.”
This “invisibility” creates a different kind of danger than the 2008 subprime crisis.
2-2. Simultaneous Borrowing and Concentration Among Low-Credit Tiers
According to CFPB (2022 data),
63% have multiple loans active simultaneously
33% have borrowed from multiple BNPL companies
Approximately 2/3 of users are in the low-credit tier
This reveals an extremely fragile structure.
3. Policy Reversal: From Strengthening Regulations to a “Hands-Off” Approach
3-1. Aiming for Stricter Regulations, Then a Change in Policy
The Biden administration's CFPB attempted to move forward with stricter regulations, treating BNPL as “equivalent to credit cards.” However, in May 2025, the regulation was removed from the priority list, and 67 related rules were withdrawn.
The influence of industry lobbying is being pointed out.
3-2. The “Optimism and Pessimism” Created by Data Distortion
Immediately after, the CFPB announced that for first-time borrowers only, the “repayment rate is 98%” and “no debt stress is observed.”
On the other hand, the delinquency rate for existing users is 42%.
—The data gap is the biggest problem, and no one truly understands the actual situation.
4. Economic Downturn and the “Time Bomb”: Future Risk Scenarios
4-1. Compound Factors Attacking Household Finances
The “signs of a storm” pointed out by Morris are as follows.
Unemployment rate at 4.3% (highest level in 4 years)
Uncertainty regarding immigration, tariffs, and government shutdowns
Resumption of student loan repayments: over 9 million delinquencies
Stagnation of investment by small and medium-sized enterprises
As these overlap, BNPL repayments will be prioritized, and instead, credit card and auto loan payments will be delayed first. Financial institution stress begins there.
4-2. Similarities and Differences with 2008
While not “systemic” like in 2008,
• Securitization of debt
• Concentration on low-credit tiers
• A structure where debt is not visible
are strikingly similar.
5. BNPL Becomes “Financial Infrastructure”: A Dangerous Ecosystem Spreading
5-1. Integration into Apple Pay, Google Pay, and Debit Cards
Klarna and Affirm have already
fully integrated into smartphone payments
installment payments at physical stores
a network of millions of merchants
built. PayPal processed $330 billion in BNPL payments in 2024.
5-2. The Next Epicenter: Rapid Expansion of B2B BNPL
The supply chain credit market is $4.9 trillion. B2B BNPL is said to boost corporate spending by an average of 40%.
Furthermore
Klarna's UK loan assets: Elliott purchases $39 billion
PayPal receivables: KKR acquires up to $44 billion
Affirm's ABS: $12 billion issued
—securitization reminiscent of the subprime crisis is advancing.
6. Moral Risk: “Would you recommend it to your mother?”
Morris cites the “Mom Test” from his Capital One days.
“If your mother asked, ‘Should I use this product?’ and you couldn't say ‘YES’ with pride, you shouldn't be offering it.”
However, BNPL companies even suggest they don't want users to improve their credit scores and “graduate.” It is less about consumer protection and more about an inherent “lock-in model.”
Conclusion: The “Other Huge Risk” Overlooked in the Shadow of the AI Bubble
While the AI data center bubble grabs all the headlines, the BNPL problem is piling up “quietly, but surely.”
It is not just young people buying the latest Apple products;
• Families paying for groceries later
• Graduates unable to balance student loan repayments with BNPL
are increasing rapidly.
Morris says, “I wouldn't call it a crisis, but caution is necessary.”
The problem is that regulators do not have “sufficient data” and are making decisions based on misplaced optimism.
Invisible debt × Concentration among low-income groups × Expansion of securitization × Economic downturn
Can measures be taken before these erupt all at once?
BNPL is no longer just a financial service; it is becoming “another financial system.”
And its collapse could come quietly, but suddenly.
