Credit cards were introduced in 1950 and quickly became a popular way to buy goods and services. These cards help people build credit and can come with great perks like cash back and travel benefits.
However, these same credit cards can have a dark side. High interest rates and annual fees have caused some people to look for alternative payment methods for making everyday purchases.
Opportunity knocks for any entrepreneur who can provide an effective solution to a common problem. Thus, buy-now-pay-later companies emerged into the spotlight, offering a new path for people who needed to borrow money to buy goods and services. As consumer confidence continues to lag, it’s easy to see why BNPL could hold promise.
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BNPL companies allow you to break each purchase into monthly installments. It typically comes to four monthly payments, and if you pay them all on time, you often don’t have to contend with interest or late fees.
BNPL solutions aren’t perfect. Not all of them help with building credit, and you can still face fees and interest if you make late payments. Furthermore, some BNPL companies charge interest right from the start.
However, the advantages of BNPL have been enough to win over new customers, and stocks in the industry have delivered some big numbers. For instance, one of the stocks on this list has more than tripled over the past year and still has a reasonable valuation.
Fortune Business Insights projects that the BNPL industry will maintain a 20.7% compound annual growth rate, or CAGR, from now until 2032. These are some of the BNPL stocks that are poised to benefit the most:
— PayPal Holdings Inc. (ticker: PYPL)
— Affirm Holdings Inc. (AFRM)
— Sezzle Inc. (SEZL)
— Block Inc. (XYZ)
— Amazon.com Inc. (AMZN)
PayPal Holdings Inc. (PYPL)
PayPal revolutionized online payments when it was first launched in 1998, so it makes sense that the company is tapping into the BNPL industry. PayPal has two BNPL offers. The first one is “Pay in 4,” where you get to split purchases into four interest-free, biweekly payments, including a small down payment. You’re essentially making four payments over six weeks for purchases that range from $30 to $1,500. Pay in 4 has a 0% APR and no late fees.
“Pay Monthly” is the other plan, which is suitable for purchases that range from $49 to $10,000. You can make monthly installments over a term of three, six, 12 or 24 months with no money down. However, the monthly payment option has an APR that ranges from 9.99% to 35.99%.
This option more closely resembles credit card debt. Both plans do not have any sign-up or late fees.
PYPL shares were shaping up to have solid one-year returns before new tariff policies took effect. But while tariffs create short-term uncertainty, PayPal has been working on its turnaround story. PayPal generated $8.4 billion in Q4 2024 revenue, which represented a 4% year-over-year increase.
The company’s BNPL successes can translate into higher revenue growth moving forward. But it’s also noteworthy that PayPal isn’t a pure BNPL play. The company makes revenue from other sources, such as transaction fees and loans.
Affirm Holdings Inc. (AFRM)
Affirm is the largest pure-play BNPL company on this list. It is an early pioneer in the industry and was founded in 2012. Now, it has a $13 billion market cap, and shares are up by more than 20% over the past year. The gains were much higher before the tariffs came into effect. The stock is more than 50% below its 52-week high.
The fintech company offers a “pay in 4” plan for purchases that range from $50 to $1,000. You may have to make a down payment, but there aren’t any fees or interest. You must make a payment every two weeks.
Customers can also take out a monthly installment plan for purchases that range from $50 to $5,000, choosing from a term of three, six, nine, 12, 18, 24 or 36 months, or even a 60-month term in some circumstances. You won’t have to pay any late fees, but the APR ranges from 0% to 36% for this service.
New buyers may qualify for 0% APR on a six-month plan. Regardless of whether you are an old or new customer, you can also get an Affirm card, which makes it easier to split your purchases into multiple payments.
Affirm delivered robust earnings in Q2 FY25, which demonstrates the BNPL industry is still gaining traction. Revenue reached $866 million in the quarter. That’s up by 47% year over year.
Affirm also grew its customer base by 23% year over year while delivering a 9.3% net profit margin.
Sezzle Inc. (SEZL)
Sezzle is a smaller BNPL company that has delivered impressive financial growth and remains under the radar. Despite more than tripling over the past year, SEZL still trades at a price-to-earnings ratio, or P/E, below 17. The fintech company also more than doubled its revenue growth year over year in Q4 2024 while registering a 25.8% net profit margin. Profits grew by more than 700% year over year.
Despite impressive one-year gains, SEZL is still down about 50% from its 52-week highs. Any positive developments around tariffs may send this stock and other BNPL companies soaring. However, its financial growth and valuation certainly make it worth considering.
Sezzle offers a similar “pay in 4” plan to other BNPL companies. You can make four payments over six weeks while not paying any interest. Sezzle has partnered with top retailers like Amazon.com Inc. (AMZN), Walmart Inc. (WMT) and Target Corp. (TGT) for its BNPL program. The stock’s market cap is about $1.4 billion.
Block Inc. (XYZ)
Block is another fintech innovator that has a BNPL segment. The company acquired Afterpay to get a jumpstart in the industry and rebranded it as Cash App Afterpay. Businesses that use Block can set up Cash App Afterpay for their e-commerce products.
This company offers a familiar deal: four interest-free payments over six weeks. Block’s data suggests that Cash App Afterpay customers spend 40% more per transaction than traditional customers and shop 50% more often. Cash App Afterpay has more than 20 million customers worldwide.
Block delivered 4.5% year-over-year revenue growth in Q4 2024. Total revenue reached $6 billion in the quarter. However, the Cash App segment delivered 16% year-over-year growth in gross profits.
Amazon.com Inc. (AMZN)
Amazon doesn’t have a BNPL platform like Affirm or Sezzle. However, it has partnered with key players to offer BNPL payment options for its products. And as Block’s data shows, people who use BNPL spend more money than traditional buyers.
That’s good for Amazon, which derives most of its revenue from e-commerce. While Amazon Web Services continues to boost profit margins and deliver impressive growth, the business still heavily depends on people buying products on its website. E-commerce sales helped the company report 10% year-over-year net sales growth in the fourth quarter.
In addition, Amazon isn’t as dependent on BNPL as the other companies on this list. Affirm and Sezzle’s entire business model depends on BNPL, for example. Amazon has plenty of revenue streams, making money from cloud computing, advertising, subscription services like Amazon Prime, and artificial intelligence. Amazon has established itself as a top choice for quality, price and convenience, a feat that few companies can match.
Free two-day shipping for Prime members, millions of products and shipment to customers’ doorsteps have turned Amazon into an online-retail juggernaut. BNPL should only add more fuel to Amazon’s long-term stock gains.
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Buy Now Pay Later Stocks: 5 BNPL Companies to Watch originally appeared on usnews.com
