The Rise of BNPL in Experiential Spending: A New Credit Cycle or a Bubble?

The Buy Now, Pay Later (BNPL) phenomenon has evolved from a niche fintech experiment into a $576 billion global market by 2025, with experiential spending—live events, travel, and wellness—emerging as its fastest-growing segment. This shift reflects a profound transformation in consumer behavior, where younger generations prioritize experiences over material goods and leverage BNPL to bridge the gap between aspiration and affordability. But as BNPL adoption accelerates, investors and regulators are grappling with a critical question: Is this a sustainable financial innovation or a nascent bubble echoing the excesses of the 2008 housing crisis or the dot-com crash?

The Experiential Spending Revolution

BNPL's integration into experiential spending is reshaping how consumers allocate discretionary income. Data from Numerator and NerdWallet reveal that 39% of BNPL users finance holiday purchases, while 36% use it for major retail events. Gen Z and millennials, who constitute 50% of BNPL users, are 42% more likely to splurge on premium travel and live events. For instance, 60% of Coachella attendees in 2026 opted for BNPL plans to cover ticket costs, despite a $41 handling fee. Similarly, Klarna reported a 50% year-over-year surge in travel bookings via BNPL in 2024, while Affirm's travel volume hit $1.2 billion in Q4 2024.

This trend is not confined to the U.S. In China, Fliggy's BNPL travel purchases grew 20% between 2023 and 2024, with Gen Z accounting for nearly a quarter of users. The appeal lies in BNPL's flexibility: interest-free installments, no upfront credit checks, and the ability to spread costs over months. For younger consumers, it's a tool to access experiences they might otherwise defer due to cash flow constraints.

Historical Parallels and Risk Signals

The parallels to past credit cycles are striking. Like the 2008 housing bubble, BNPL's growth is driven by a surge in consumer access to credit, often for discretionary purchases. However, BNPL's risk profile differs in key ways. Unlike subprime mortgages, which were securitized and opaque, BNPL loans are typically small, short-term, and unsecured. Yet, the lack of credit reporting for most BNPL activity creates a blind spot in traditional risk assessment. The Federal Reserve Bank of Kansas City found that 48% of BNPL users had four or more indicators of financial strain, compared to 82% of non-users.

The dot-com crash offers another lens. BNPL's rapid adoption mirrors the speculative frenzy of the late 1990s, where investors poured money into unproven tech ventures. Today, fintechs like Klarna, Affirm, and Uplift are valued at $12 billion, $6.5 billion, and $2.8 billion, respectively, despite mixed profitability. Their valuations hinge on assumptions about sustained growth in experiential spending and regulatory leniency.

Fintech Valuation Metrics and Investment Opportunities

The BNPL sector's valuation dynamics highlight both promise and peril. Klarna, the market leader, has expanded into travel financing via partnerships with airlines and hotels, driving a 38% revenue increase in 2024. Affirm's focus on premium experiences—such as luxury travel and fitness equipment—has attracted high-income users, though its net loss of $150 million in Q4 2024 raises questions about scalability. Uplift, meanwhile, has carved a niche in healthcare and education financing, a sector projected to grow 25% annually.

Investors must weigh these metrics against macroeconomic headwinds. Rising inflation and tighter monetary policy could strain BNPL users, particularly those with limited financial buffers. Morgan Stanley warns that BNPL's “masking effect” on credit risk—by not reporting to bureaus—could delay the recognition of systemic stress. For example, LendingTree found that 41% of BNPL users made at least one late payment in 2025, up from 34% in 2024.

Regulatory and Structural Risks

Regulatory scrutiny is intensifying. Australia's reclassification of BNPL as “low-cost credit contracts” in 2025 and the EU's updated Consumer Credit Directive (CCD II) are forcing providers to conduct creditworthiness checks, even for interest-free plans. In the U.S., the CFPB's reduced oversight under recent administrations has allowed BNPL to proliferate, but this could reverse if political winds shift.

Structurally, BNPL's reliance on high-frequency, low-margin transactions makes it vulnerable to margin compression. For instance, Uplift's travel financing segment, while growing, carries higher operational costs due to the complexity of multi-leg bookings. Similarly, Affirm's expansion into healthcare financing faces competition from traditional lenders and insurers.

A Bubble or a Sustainable Shift?

The answer lies in the interplay of consumer behavior and macroeconomic conditions. BNPL's growth in experiential spending reflects a genuine shift toward experience-based consumption, particularly among Gen Z and millennials. However, the risks of overextension—exacerbated by weak credit reporting and regulatory gaps—cannot be ignored.

For investors, the key is to differentiate between fintechs with robust risk management and those relying on speculative growth. Klarna's partnerships with travel platforms and its focus on premium users position it as a safer bet, while Affirm's exposure to volatile sectors like fitness equipment may prove riskier. Uplift's diversification into healthcare and education offers a hedge against sector-specific downturns.

Conclusion

BNPL's rise in experiential spending is a testament to the power of financial innovation to democratize access to experiences. Yet, its trajectory mirrors past cycles of euphoria and correction. While the current data does not yet signal a bubble, the structural risks—debt accumulation, regulatory shifts, and macroeconomic volatility—demand caution. For investors, the opportunity lies in supporting fintechs that balance growth with prudent risk management, ensuring they can weather the next phase of this evolving credit landscape.