Buy Now, Pay Later Is Surfing the Private Credit Wave

Higher interest rates were supposed to put an end to the fast growth of buy now, pay later lenders. But right now they might actually be helping out.

Unlike banks that fund their loans through their deposits, BNPL players that offer small loans and installments to shoppers need to get that money from the market, as do other nonbank financial-technology companies. So they are, in theory, more exposed to the cost of rising interest rates. That was a big reason that many investors expected banks to regain the upper hand versus their disrupters, leading to a sharp drop in valuations for many “fintech” highfliers, including Affirm, over the past couple of years.