The  buy now, pay later (BNPL) boom, which uses technology and alternative credit risk evaluations at points of sale for instant credit decisioning, is a trend JPMorgan Chase is taking seriously, CEO Jamie Dimon said Monday.

“Buy now, pay later in the United States, I think, is about $50 billion. It’s growing unbelievably rapidly,” Dimon said on the Morgan Stanley U.S. Financials, Payments and Commercial Real Estate conference call Monday.

Instead of paying with a credit card at participating merchants, BNPL allows approved customers to pay by logging onto an app or downloading it via a QR code on a merchant’s site or through an app store. Behind the scenes, an API integrates with the store’s e-commerce site or platform, for example, Shopify or Salesforce commerce cloud, to process payments. Even for merchants who do not participate, apps such as Affirm exist to provide a one-time virtual card to customers to make a purchase.

Customers provide basic information, such as name, address, phone number and birth date, and then the BNPL company performs a “secret sauce” automatic risk check to approve credit on the spot, Ginger Schmeltzer, senior analyst for Aite Group’s retail banking and payments practice, told Bank Automation News. The absence of a credit report pull makes BNPL apps appealing to customers with thin-credit files, she added.

BNPLs generally make money by charging merchants a percentage of the purchase price and charging interest on the product. Merchants like BNPL because they are paid in full at the time of purchase and it increases conversions anywhere from 5% to 20%, said Schmeltzer. Typically, BNPL target purchases are in the $200 to $500 range, but there are also examples of higher-end items with longer terms, such as Peloton’s BNPL option through Affirm.

Liquidity is provided through investors and banks, Schmeltzer said. While BNPL companies generally report loss rates of 1% to 2%, she said she has seen data that approximately 20 % of BNPL borrowers have missed a payment.

BNPL spending, which includes fixed installment plans and flexible credit accounts, will reach $995 billion in 2026, up from $266 billion in 2021, according to a study released Monday by Juniper Research. That’s a predicted growth of 274%, which the research firm said is fueled by a desire for credit that spreads out costs for customers, particularly in the wake of the pandemic, when finances are strained for many.

It’s not only merchants and customers that are buying into the BNPL trend. Investors seem to love it, too. Sweden-based BNPL fintech Klarna, one of the biggest players in the space, last week revealed a new equity funding round of $639 million, bringing the company’s post-money valuation to $45.6 billion and making it the highest-valued private fintech in Europe.

Other BNPL fintechs are also attracting significant funding, Schmeltzer told BAN. While she tracks major players like Klarna, Affirm and Afterpay, she has also identified nearly 20 smaller niche fintechs, including those that specialize in funding car repairs, plumbing or appliance replacement.

And BNPL fintechs, which have thrived during the current e-commerce boom, are now also turning to points of sale inside real-world stores, Schmeltzer said.

“There’s so many players piling into the space because there’s so much opportunity for revenue,” Schmeltzer said. “There’s just a lot of potential for additional spend here, which I think is what’s really attracting the investors.”