The rapid rise of Buy Now, Pay Later (BNPL) services is sparking deep concern among financial experts, with indicators suggesting growing financial strain among consumers who are increasingly using the service for essential needs rather than luxury purchases.

Nigel Morris, co-founder of Capital One and an early investor in global BNPL platforms, has expressed serious concern over the current trend.

Speaking at the Web Summit in Lisbon, Morris noted that the use of installment-based payment services to buy daily necessities such as groceries is a telling sign of worsening economic pressure among households.

Recent market data shows just how widespread BNPL adoption has become. According to research by Empower, the United States now records an estimated 91.5 million BNPL users, with a quarter of them using the service to pay for food items.

LendingTree’s latest survey further revealed an alarming upward trend in defaults, with 42% of users making at least one late payment in 2025 — a notable rise from previous years.

Originally marketed as a flexible payment method for discretionary spending, BNPL has now evolved into a financial fallback for many consumers.

Analysts warn that this shift exposes deeper weaknesses in household financial stability.

A concerning element highlighted by Morris is what regulators refer to as “phantom debt”. Because many BNPL providers do not report to credit bureaus, existing debts become unseen, making it difficult for lenders to assess true credit exposure.

Research from the Consumer Financial Protection Bureau (CFPB) revealed that more than 60% of users took out multiple BNPL loans simultaneously, with many borrowing from more than one platform in a single period.

Industry statistics also show that a large proportion of BNPL users fall into the subprime credit category, raising further caution about long-term repayment capacity.

While experts do not believe the situation has reached the level of a systemic financial crisis, the combination of rising unemployment, stalled wage growth, and the recent expiration of student loan forgiveness has created a risk-laden environment.

Proposed regulatory efforts have so far seen mixed results. Attempts to classify BNPL lending under the same regulatory framework as credit cards faced reversals, leading to fragmented state-level regulation rather than a unified national approach.

BNPL’s growth is no longer restricted to consumer-level lending. Financial analysts have observed aggressive expansion into B2B transactions, raising fears of a large-scale debt accumulation similar to pre-crisis mortgage securitization patterns.

Reports show that billions of dollars’ worth of BNPL-related debt instruments have already entered the investment market through securitization deals.

Despite his significant investments in the sector, Morris cautioned that financial institutions must prioritize responsible lending.

He referenced a principle known as “the mom test,” which suggests that lenders should only promote products they would confidently recommend to their own mothers.

With BNPL platforms increasingly embedded in digital banking, mobile wallets, and retail systems, the model continues to evolve — but so do the risks.

Analysts argue that unless regulatory clarity improves and credit transparency increases, the BNPL trend could become a catalyst for broader consumer-debt distress.

Morris did not forecast an imminent collapse, but urged early intervention and stronger oversight, noting that “storm clouds are clearly visible on the horizon.”

Source: Techcrunch