Buy Now, Pay Later: How Small-Ticket Debt Fuels Credit Risks and Shapes Consumption Trends in India

The Buy Now, Pay Later (BNPL) model has revolutionized consumer spending, offering instant gratification with deferred payments. While convenient, its rapid adoption, exemplified by DoorDash’s partnership with Klarna, raises concerns about systemic credit risks. Meanwhile, India’s BNPL and EMI trends reveal a parallel narrative of growth and caution, reflecting broader shifts in consumption and financial behavior.

DoorDash and BNPL: A Recipe for Debt?

In March 2025, DoorDash announced a BNPL collaboration with Klarna, allowing customers to split payments for orders as small as $40–$50 into interest-free installments. While this boosts short-term spending, critics warn that frequent use for essentials like food delivery could trap users in debt cycles.

• Risky Demographics: BNPL users are often younger, less financially stable, and more likely to miss payments. Chuck Bell of Consumer Reports notes that BNPL loans can become “costly meals” if users accumulate late fees or juggle multiple debts.

• Delinquency Rates: BNPL defaults in the U.S. are nearly four times higher than credit card delinquencies, driven by lax eligibility checks and high-risk borrowers.

India’s BNPL Boom: Growth Amid Regulatory Scrutiny

India’s BNPL market is projected to reach $21.95 billion in 2025, fueled by low credit card penetration (5%) and e-commerce growth. However, this expansion comes with challenges:

• Rural Consumption Shift: Rural India’s Monthly Per Capita Consumption Expenditure (MPCE) rose 9.2% YoY, driving demand for branded goods via BNPL and EMI options. Platforms like LazyPay and Simpl target millennials and Gen Z, enabling small-ticket purchases in tier-2/3 cities.

• Credit Slowdown: Personal loan growth decelerated to 14% YoY in March 2025 (vs. 17.6% in 2024), reflecting tighter RBI regulations and cautious lending.

BNPL and Credit Trends: India vs. the U.S. at a Glance

• Credit Growth: In India, non-food credit growth stands at approximately 12% in 2025, reflecting a slight slowdown compared to previous years due to regulatory tightening. In contrast, the U.S. BNPL sector is grappling with high delinquency rates, nearly four times those of traditional credit cards.

• Key Demographics: Indian BNPL adoption is surging among rural youth and first-time borrowers, especially in tier-2 and tier-3 cities. In the U.S., BNPL users tend to be younger and more indebted, often with less stable financial backgrounds.

• Regulatory Response: The Reserve Bank of India (RBI) has increased oversight and tightened lending norms to curb rising defaults. Meanwhile, in the U.S., agencies like the Consumer Financial Protection Bureau (CFPB) are scrutinizing BNPL providers due to mounting consumer debt and missed payments.

EMI Trends: Democratizing Credit or Deepening Risk?

India’s split-payment market grew at a 321% CAGR (FY19–FY21), bridging gaps for underserved groups like Gen Z and non-salaried workers. However, aggressive lending by firms like Ujjivan Small Finance Bank has led to 30% stock declines and rising defaults. Analysts warn that festive demand will determine whether stress persists into 2026.

What This Means for Economic Stability

• Short-Term Stimulus: BNPL boosts spending, particularly in India’s $1.1 trillion e-commerce sector.

• Long-Term Risks: Unchecked BNPL adoption could mirror the 2008 credit bubble, with defaults spilling into broader markets. In India, small-loan defaults are already impacting bank earnings and stock valuations.

The BNPL boom underscores a global tension between accessibility and accountability. While it empowers consumers, proactive regulation, like India’s RBI measures, and financial literacy are critical to preventing a debt-driven downturn.