The buy now pay later (BNPL) industry has been on fire — and it looks like it’s just getting hotter this holiday season.

What’s the big deal? Retailers are stocking up on BNPL options (the alternative form of payment) for the holidays, which is helping Affirm (NASDAQ:AFRM) — the largest public BNPL company:

• Target partnered with Affirm last week to offer its payment option.
• Walmart stopped its own BNPL program to expand its partnership with Affirm.

Retailers want one thing — more sales — and RBC estimates BNPL can increase sales conversion by 20-30% and order sizes by 30-50%.

BNPL makes up less than 2% of global e-commerce transactions — so there’s still plenty of room to grow. Which has investors asking: Just how big can it get?

Looking beyond BNPL: Affirm’s stock is up 104% since announcing its Amazon partnership in August — with signs of more growth as its Shopify and Walmart partnerships ramp up this holiday.

Affirm wants to look more like a financial super app — putting it in direct competition with Square and Paypal.

• Its BNPL product has become a strong way to acquire customers and now, it’ll have to figure out how to make more money from existing customers.
• In its recent investor presentation, Affirm highlighted upcoming products including crypto trading, debit cards and cashback rewards.

When, not if: Unlike the credit card industry, which is heavily regulated, BNPL isn’t since it’s still so new. But if BNPL users overspend and take on too much debt, the problems this would cause could lead to regulations.

But given BNPL’s rapid growth, regulations are likely coming and it’s just a matter of when and how big its impact will be.