Buy Now Pay (Pain?) Later

Management Science, Forthcoming

71 Pages Posted: 30 Sep 2022 Last revised: 1 May 2024

See all articles by Ed deHaan

Ed deHaan

Stanford Graduate School of Business

Jungbae Kim

Singapore Management University - School of Accountancy

Ben Lourie

University of California, Irvine

Chenqi Zhu

University of California, Irvine - Paul Merage School of Business

Date Written: August 28, 2023

Abstract

“Buy-Now-Pay-Later” (BNPL) is a largely unregulated FinTech innovation that provides consumers with easy access to credit for retail purchases. BNPL spending is projected to reach $1 trillion by 2025, but we know little about its effects. Using banking data for 10.6 million U.S. consumers, we investigate the effects of BNPL on leading indicators of users’ financial health. We find that new BNPL users experience rapid increases in bank overdraft charges and credit card interest and fees, as compared to non-users, consistent with BNPL facilitating over-borrowing. An instrumental variable exploiting consumers’ pre-BNPL shopping habits bolsters our inferences. Our results inform regulatory investigations into the effects of BNPL on users’ financial health, and expand academia’s understanding of an important consumer credit innovation.

Keywords: BNPL, FinTech, consumer credit, household accounting and finance, regulation

JEL Classification: G50, G51, G41, M41

Suggested Citation

deHaan, Ed and Kim, Jungbae and Lourie, Ben and Zhu, Chenqi, Buy Now Pay (Pain?) Later (August 28, 2023). Management Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4230633 or http://dx.doi.org/10.2139/ssrn.4230633

Ed DeHaan

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, 94305
United States

Jungbae Kim

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

Ben Lourie (Contact Author)

University of California, Irvine ( email )

Irvine, CA 92697-3125
United States

Chenqi Zhu

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States

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