Buy now, pay later: How financial education can break the debt trap

In the age of one-click checkouts and slick fintech interfaces, it’s never been easier to buy something you can’t afford. And according to recent headlines, it’s never been easier to not pay for it either. But the real problem isn’t fast credit, it’s that we haven’t been taught how to manage it.

Klarna – a pioneer of buy now, pay later (BNPL) lending, which allows purchases to be made in installments – recently reported $136 million in credit losses as consumers struggle to make repayments. The fintech revolutionary’s promise of financial flexibility and convenience has collided head-on with a familiar reality: When innovation evolves faster than understanding, problems – and in this case, debt – multiply.

With over 100 million users, these losses are not just a corporate headache for Klarna. This is a symptom of a global financial culture where consumers are left vulnerable from lack of guidance. As people increasingly turn to installment-based payments for everything from burritos to streaming services, what was once an alternative to credit cards has quickly become a default method of everyday spending. The digital checkout is smooth, but the collective consequences for financial health are anything but.

So, how do we begin to build financial resilience in an economy designed for seamless spending? The answer starts with financial education.

This issue isn’t confined to one company or country. Data suggests a broader, more troubling trend.

The World Economic Forum’s Global Retail Investor Outlook Survey, for example, shows that nearly one-third of respondents struggle to meet their current financial obligations. One in five listed debt repayment among their top three financial priorities.

These are not just individual lapses in judgment. We are witnessing a systemic shortfall in financial education, where new ways to spend outpace efforts to teach people how to manage money.

The lesson here isn’t that BNPL, or any other innovative financial product, is inherently harmful. For many users, these tools offer much-needed flexibility. However, innovation without education leaves people exposed. A culture of financial innovation and access must be matched with a culture of financial readiness if we want to ensure long-term economic stability for everyone.

We teach people how to drive before they get behind the wheel, but we don’t do the same before they start financing their lives. In today’s financial world, having the means to create a roadmap before embarking on your financial journey is long overdue.

Inclusive financial education opportunities, particularly on budgeting, saving and responsible borrowing, are critical to saving people from debt traps, but are often absent during key teachable moments. When spending is easier than ever, ongoing, relevant instruction that equips people with foundational financial understanding is a must.

The responsibility doesn’t fall on consumers alone. Fintech services and traditional financial institutions alike could implement initiatives that inform, not just entice. Technology can address key barriers and enhance affordability and accessibility to financial education. This can help consumers better prepare for the less glamorous “pay later” part of BNPL.

Every BNPL platform could include simple, intuitive prompts about repayment timelines, budget health and potential risks before confirming a purchase, for example. Traditional financial products, such as your bank or investment account, can turn every transaction into a teachable moment by integrating features like goal-based planning tools, personalized savings recommendations, and clear explanations of fees and risks. Schools could also prioritize modern money education the way they do with other core subjects.

Policy-makers could push for transparency and fair design standards. As the Forum’s Global Retail Investor Outlook notes, effective policies can safeguard people and equip them with the necessary tools to navigate their finances confidently, while also encouraging innovation.

This is especially urgent as younger generations come of age in a hyper-digital economy. Today’s 18–24-year-old consumers are already more likely than previous generations to rely on installment payment services. Many do so out of necessity, not recklessness. Without education, that necessity can become a debt trap that takes years to escape.

The next wave of financial innovation should not just be about speed, personalization or convenience. It should be about understanding.

We all have a role to play in creating this culture of financial readiness. And if we want consumers to pay later, we need to help them prepare now. When spending takes one click, financial education needs to move just as fast.