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Buy Now, Pay Later is everywhere. Walk into almost every retailer, from mass chains to independent boutiques and you’ll find Klarna, Affirm, Sezzle, and Afterpay badges at checkout. Look for those same goods online and you’ll find the same logos alongside legacy credit card brands.

Consumers are increasingly choosing to spread costs across several weeks without the impact of interest that can come from credit cards. This holiday season you can expect even more, both now and later. With approval rates on the rise, the BNPL market is projected to hit $560.1 billion in global transactions in 2025.

The numbers look impressive until you examine who bears the risk and what retailers are actually trading away. Underneath this growth story is a shaky structure of outsourced trust and increased risk, one built on deferred payments, opaque credit exposure, and minimal consumer oversight.

BNPL’s Growth Meets Economic Reality

Delinquency rates are on the rise alongside the growth. As economic stress builds, 41% of BNPL users surveyed report having late payments within the past year.

According to the Consumer Financial Protection Bureau’s report on BNPL and other forms of unsecured debt, the majority of new loans were issued to borrowers classified as subprime or deep subprime. Their credit card utilization rates were already rising before they turned to BNPL, suggesting depleted liquidity pushed them toward installment financing. The data shows that BNPL is serving consumers who might otherwise struggle to access traditional credit, highlighting both its inclusivity and its underlying risk.

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Who bears the risk depends on the BNPL model. Some providers carry the loans and fund defaults through merchant fees, while others share losses back to retailers through fee structures. With fees of 2 to 8 percent, considerably higher than traditional credit card processing costs, and opaque default calculations, the underlying math often hides what retailers are really paying for conversion lift.

BNPL’s rapid adoption, coupled with mounting consumer delinquencies and limited transparency, has accelerated calls for oversight. Regulators are now responding to the sector’s expansion rather than its structure, signaling a shift from curiosity to caution.

A Fragmented Regulatory Landscape Takes Shape

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Regulatory scrutiny is now beginning to grow at least at the state level. In May of this year, New York state passed the “Buy-Now-Pay-Later Act” (S3008), the first-of-its-kind licensing framework specifically targeting BNPL providers. While state oversight expands, federal enforcement has taken a step back.

After signaling in 2024 that new dispute and refund rules would treat BNPL more like traditional credit cards, regulators paused those efforts in May and indicated they are reconsidering how best to apply existing lending laws. The move has created uncertainty for both providers and retailers, leaving states to fill the gap with their own licensing and disclosure requirements. In contrast, the UK is advancing BNPL rules.

FICO is now integrating BNPL repayment data into credit scores, bringing visibility to loans that were previously unreported. The shift makes BNPL a measurable form of consumer credit and moves toward closing the regulatory gap that allowed the sector to scale unchecked.

While legislation slowly emerges, these fintech platforms collect on the true commodity of customer data. The more immediate concern for retailers is how BNPL platforms own the customer payment relationship.

Could Layaway Be The Halfway?

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What if the solution to BNPL’s problems has been sitting in retail’s recent past, waiting for technology to make it viable again?

I grew up watching my mother manage layaway purchases at Walmart. Every few weeks we would visit to make a small payment, building anticipation along the way. The lesson was clear that value came from patience and commitment, not instant gratification.

Layaway was actually financially brilliant, though it’s been dismissed as outdated. In the 1930s layaway emerged as a response to economic conditions of the Depression. This method requires payment prior to possession, but maintains the retailer-customer relationship through scheduled interactions.

The model served as built-in credit regulation. Customers paid before receiving goods, eliminating debt accumulation. There were no interest charges or fees in the traditional model. Overspending was naturally limited because the total cost was known upfront. Default consequences were minor, losing your deposit, not your credit score or future borrowing access.

As a behavioral model for sustainable consumption, layaway excelled. The psychological value of waiting created anticipation that increased satisfaction and emotional attachment to purchases. Paying before possession reduced impulse buying and encouraged more intentional decisions, creating customers who were both committed and predictable.

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Layaway, long dismissed as outdated, offered discipline and relationship depth that modern retail often lacks. But it had fatal flaws. Operational complexity created significant challenges: paperwork, inventory tracking, physical storage requirements and rigid payment schedules all added cost. Over time, it also took on a stigma of financial struggle rather than smart planning.

The systems behind it were outdated, paper-heavy, and out of sync with modern retail operations. The problems that killed layaway weren’t inherent to the model, they were limitations of the technology available at the time. That’s changed.

How Modern Retail Tech Can Reinvent Layaway

Modern retail technology has the potential to solve the majority of layaway’s historical friction points while preserving its structural advantages and giving retailers something BNPL never could: complete ownership of the customer credit relationship.

Retailers already have the technology to reinvent layaway for the digital age. Here’s how existing tools can transform a legacy program into a data-rich, loyalty-driving model:

Automation and Operational Efficiency

• Automated billing, digital payment scheduling, and virtual inventory systems can replace the paper-heavy, backroom processes that once made layaway inefficient. The same logic can handle layaway scheduling, fulfillment, and item reservation without physical segregation thus increasing touchpoints.

Personalization and Smarter Payment Timing

• Instead of rigid deadlines, personalized payment plans can adapt to real cash-flow cycles, giving flexibility without extending credit.

** Forecasting Alignment to Demand**

• AI forecasting tools used for replenishment and pricing can identify which products are likely to perform best in layaway programs. This allows retailers to stock accordingly, improving sell-through and reducing excess inventory.

Loyalty and Data Ownership

• Retailers can collect high-value behavioral data. This data becomes the foundation for loyalty programs built on reliability rather than spending alone, something BNPL cannot offer because the data sits with third-party providers.

The Retailer Retains the Relationship

• Keeping the financial interaction inside the retailer’s ecosystem offers transparency into customer payment behavior, enables proactive service, maintains control of communication, creates predictable revenue, and protects first-party data that would otherwise flow to fintech intermediaries.

Deferred Gratification Can Be a Strategy, Not a Setback

• Leading brands already leverage scarcity and waiting to create value. Apple’s product waitlists and luxury made-to-order models all use time as a brand asset. Layaway applies the same principle to mainstream retail, transforming patience into participation and anticipation into loyalty.

The technology exists, the customer psychology is proven, and the financial logic aligns with how retailers already operate. A modernized “digital layaway” could reclaim data, loyalty, and discipline in a marketplace that outsourced all three. This isn’t a retreat to the past. It’s retail learning the oldest lesson in commerce while using the newest tools available.

The Test Ahead For BNPL

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The period post holiday 2025 will test BNPL’s sustainability. As economic pressure builds and defaults climb, retailers must decide whether to continue intermediating customer relationships through fintech platforms, or to rebuild direct connections using modern tools. Regulatory pressure will force this decision regardless. State-level regulation will likely spread beyond New York and Nevada as other states observe outcomes.

BNPL reflects an era of cheap money, instant gratification, and the belief that scale solves everything. Although BNPL expanded the general-store concept to billions, it separated credit from community. What comes next will need to reflect different values. The companies that own customer credit relationships will own customer loyalty.