BNPL for Beans: Why Your Borrowers Are Financing Their Frosted Flakes and What That Means for YOUR Loan Portfolio

Remember when Buy Now, Pay Later (BNPL) was the shiny toy Gen‑Z used to snag Yeezys and Pelotons? 

Fast‑forward to 2025, and one in four BNPL users now swipe the four‑pay button at checkout for milk, eggs, and baby formula – up from just 14 % last year, according to LendingTree’s April survey(lendingtree.com). 

At the same time, 41 % of those users admit they paid a BNPL bill late in the past 12 months (up from 34 %)(lendingtree.com).

For those of us funding short‑term, sub‑$1K loans to credit‑challenged, banked-but-broke working adults, this grocery‑store land‑grab is a massive flashing dashboard warning.

Here’s our Trihouse Consulting take.

1. Profitability Squeeze: BNPL Is Skimming the Cream Off Your Fee Revenue

• Less wallet share for you. Every $150 Instacart basket pushed into a BNPL plan means $150 less liquidity on a borrower’s next payday, the very cash you expect to draft for their installment or LOC payment.

• Interest expense mismatch. You earn your APR daily; BNPL providers front‑load their merchant discount fees. When the consumer’s paycheck hits, the BNPL autopay fires before your ACH. Expect more same‑day NSF hits and re‑presentment fees.

• Higher charge‑offs. Industry-wide default rates in storefront portfolios already range between 6 % and 12% (double that online), with grocery BNPL stacking, a model for the top of that range, or worse.

Trihouse Rule of Thumb: For every 10 % lift in BNPL grocery penetration, bake in a 50–75 bp reduction in portfolio gross yield unless you tighten debt‑to‑income (DTI) thresholds or raise fees on new money.

2. Collections Headwinds: You’re Now Third in the Payment Waterfall

BNPL contracts typically hit checking accounts via debit card rails the moment payroll settles. Your ACH pull hits hours later. Result?

• More broken promises & roll‑to‑charge‑off speed. Our benchmark Internet lender saw net collection efficiency of 87 %; their First Payment Defaults still ran north of 15 % even before the BNPL boom.

• Repos & garnishments get pricier. Rising consumer bankruptcies – up 22 % YoY through February mean more automatic stays, attorney time, and slower recoveries.

• Dialer fatigue. Expect higher right‑party‑contact attempts per cure. If your collectors average 55 calls to cure a payday default today, plan for 65‑70 by Q4.

3. First‑Payment Default (FPD) Spike: Modeling the Next Six Months

• Historic storefront FPD target: ≤15 %; industry online average: 25 %+.

• Trihouse forecast: BNPL grocery penetration pushes FPD +300–500 bps. A 12 % FPD book could breach 17 % by holiday 2025 if underwriting is unchanged.

Quick Stress‑Test

Portfolio: $5 M outstanding | Average installment term: 180 days | Fee yield: 98 % APR equivalent

• Baseline charge‑off 8 % → Net revenue $700 K/mo

• Post‑BNPL charge‑off 11 % → Net revenue $550 K/mo (‑21 %)

That delta torches one‑third of your EBITDA.

4. Action Steps for Lenders – Starting Monday Morning

1. Front‑Load ACH Windows. Move your primary debit to day‑1 predawn (ex: 4 a.m.) to jump ahead of BNPL card debits. Yes, your processor can do it.

2. BNPL Inquiry Flag. Pull Chirp, Plaid, or MX data to count open BNPL trades and jam a 30 % DTI hard stop above four active BNPL plans.

3. Graduated Pricing. Add 300 – 500 bps to fees on applicants with ≥3 concurrent BNPL contracts.

4. Collector Toolkit 2.0. Deploy SMS payment links that settle in real‑time (push‑to‑card) to capture funds before the next BNPL installment.

5. Marketing Shift. Google Ads blocks >36 % APR products. Pivot spend to Facebook custom audiences of gig‑economy workers; they over‑index on BNPL usage.

6. Investor Narrative. Update deck language: “BNPL grocery adoption = tail‑risk. We mitigate via real‑time bank analytics, dynamic pricing, and ACH timing.”

5. The Macro Lens

Between CPI‑driven food inflation (up 23.6 % since 2020) and a credit‑card delinquency spike not seen since the Great Recession, consumers are juggling more short‑term debt than ever.

BNPL grocery financing is the canary in the coal mine.

Bottom line: If your underwriting, fee structure, and collections cadence still look like 2022, you’re an endangered species.

Tweak now, or watch your portfolio turn into alphabet soup: NSF ➜ FPD ➜ CO.

Stay nimble, stay profitable.

— Trihouse Consulting