Buy Now, Pay Later ABS: From Checkout to Securitization

In recent years, buy now, pay later (BNPL) loans have moved from a niche fintech asset class of asset-backed securities (ABS) to a more visible segment of consumer finance. Broadly speaking, BNPL, which is a subset of the broader unsecured consumer lending market, encompasses a variety of products for point-of-sale (POS) financing. As the name suggests, BNPL services provide financing at the time and place of purchase, allowing for payment over time rather than up front. BNPL products range from short-duration and often interest-free pay-in-four loans to longer-term installment loans.

Annual BNPL ABS issuance has increased from less than $1 billion in 2020 to more than $5.5 billion in 2025. However, securitization remains a relatively small portion of the broader BNPL market, with the Federal Reserve estimating approximately $156 billion in originations in 2025 alone. ABS issuance backed by BNPLs existed before the pandemic but accelerated as e-commerce adoption and merchant…