When Nigel Morris tells you he’s worried about the economy, you listen. As industry observers know, Morris co-founded Capital One and pioneered lending to subprime borrowers, building an empire on understanding exactly how much financial stress the average American can handle. Now, as an early investor in Klarna and other buy now, pay later companies like Aplazo in Mexico, he’s watching something that makes him deeply uncomfortable.
“To see that people are using [BNPL services] to buy something as basic and fundamental as groceries,” Morris told me onstage at Web Summit in Lisbon this week, “I think is a pretty clear indication that a lot of people are struggling.”
The statistics back up his unease. Buy now, pay later services have exploded to 91.5 million users in the United States, according to the financial services firm Empower, with 25% using the services to finance their groceries as of earlier this year, according to survey data released in late October by lending marketplace Lending Tree.
These aren’t discretionary purchases — the designer bags and latest Apple headphones that BNPL was marketed for originally. Borrowers aren’t paying it all back, either. According to Lending Tree, default rates are accelerating: 42% of BNPL users made at least one late payment in 2025, up from 39% in 2024 and 34% in 2023.
This isn’t just a consumer finance story; it’s a canary in the coal mine for the entire venture-backed fintech ecosystem and beyond, echoing what preceded the 2008 mortgage crisis except for one thing: It’s largely invisible.
Because most BNPL loans aren’t reported to credit bureaus, they create what regulators call “phantom debt.” That means other lenders can’t see when someone has taken out five different BNPL loans across multiple platforms. The credit system is flying blind.
“In a world where, if I’m a buy-now-pay-later provider, and I’m not checking bureau data, I’m not feeding bureau data, I am oblivious to the fact that Nigel may have taken out 10 of these things in the last week,” Morris explained. “[That’s] absolutely true.”
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Storm clouds on the horizon
The numbers that are available are both ugly and dated. Consumer Financial Protection Bureau data published in January of this year — after the agency issued market monitoring orders to major BNPL providers, including Affirm, Afterpay, and Klarna — showed that roughly 63% of borrowers originated multiple simultaneous loans at some point during the year, and 33% took out loans from multiple BNPL lenders.
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