Gen Z Uses Buy Now, Pay Later Payments To Travel

Gen Z is using buy now, pay later platforms to fund their vacations.

Why It Hits (The Wallet): Young people don’t typically have the means to afford increasingly expensive airline tickets and hotel stays. But they also don’t want to miss out on the action of experiencing them, especially as social media creates the illusion that everyone else is. That can create some financial headaches down the line.

Behind the Trips: Actually paying for your summer vacation is a problem for the fall.

• BNPL platform Klarna said travel bookings using its service grew by 50% last year, which was likely supercharged by its partnership with Expedia.
• Most platforms now have a dedicated tab for travel and following travel-related brands.
• Gen Z and millennial travelers are behind the surge, with the age cohorts 50% more likely than others to use the Pay-In-Four model for personal travel.
• Additionally, a recent J.D. Power survey found that Gen Zers are using BNPL services more frequently than traditional credit cards.

Last Stop: The trends make sense when consumers with “lower overall financial well-being” are most likely to use BNPL services, per the Federal Reserve. When used correctly, it can be a powerful tool. But when used incorrectly, it can be a financial trap. People easily lose track of how many things they’ve put on payment plans. Some people even pay for BNPL purchases with credit cards, which can be risky. And when it comes to travel, canceled bookings or missed flights put people on the hook for payments regardless.

It’s no surprise that Klarna’s credit losses increased 17% over the past year, and 41% of customers report struggling to pay their loans on time.

Prediction: While travel, hospitality, and event companies may be enjoying the increased spending now, a BNPL crunch could lead to a significant pullback in spending from younger customers in the near future.