DoorDash is expanding its payment options by partnering with Klarna, a leading Buy Now, Pay Later (BNPL) provider, to offer users the ability to pay for meals in installments. This move marks a significant shift in the BNPL landscape, which has traditionally been associated with larger purchases such as furniture and electronics.
With this new feature, DoorDash customers will soon have the flexibility to pay for food orders in four interest-free installments or defer payments to better align with their paycheck schedules. The partnership reflects a growing trend of BNPL services becoming integrated into everyday spending, particularly among younger consumers seeking to stretch their budgets.
The BNPL industry has seen rapid growth in recent years, with major players like Klarna, Affirm, and Apple expanding their services. During last year’s holiday shopping season, BNPL transactions reached record levels, contributing over $18 billion in online spending, a nearly 10% increase compared to the previous year. Research indicates that these services can encourage higher spending, with online BNPL purchases boosting average transaction sizes by 30% to 50%.
Despite their increasing popularity, BNPL services have sparked concerns among economists and consumer advocates. Limited regulatory oversight and unclear terms have contributed to uncertainty regarding the full extent of consumer debt. Household debt in the U.S. has been on the rise, reaching $18.04 trillion in the fourth quarter of last year. Additionally, the percentage of serious delinquencies—missed payments exceeding 90 days—on auto loans and credit cards has surged to its highest level in 14 years.
BNPL providers make money by charging merchants fees ranging from 1.5% to 7% of the transaction price. Many businesses are willing to absorb these costs due to the benefits of increased consumer spending and higher conversion rates. The model has proven particularly effective in encouraging customers to complete purchases they might otherwise abandon.
For Klarna, the DoorDash partnership arrives at a pivotal moment. The Swedish fintech company is gearing up to go public on the New York Stock Exchange, seeking to leverage the ongoing growth of BNPL services. Klarna recently reported a 24% rise in revenue for 2024, highlighting the sector’s rapid expansion. Forecasts indicate that BNPL transactions could exceed $160 billion within the next seven years.
While DoorDash is best known for food delivery, the company has also expanded into retail, allowing users to purchase high-ticket items from third-party merchants such as Best Buy and Home Depot. The introduction of BNPL for food purchases aligns with its broader strategy of enhancing customer payment flexibility and driving engagement across its platform.
As the BNPL model continues to evolve, its integration into everyday transactions like food delivery could further reshape consumer spending habits. However, the long-term impact on household debt and financial stability remains a topic of concern among industry experts.