Buy Now Pay (Pain?) Later

51 Pages Posted: 30 Sep 2022 Last revised: 29 Oct 2022

See all articles by Ed deHaan

Ed deHaan

University of Washington - Michael G. Foster School of Business; University of Washington - Department of Accounting

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: September 27, 2022

Abstract

“Buy Now Pay Later” (BNPL) is a largely unregulated FinTech innovation that provides consumers with easy access to credit for specific retail purchases. The BNPL market is projected to reach $1 trillion by 2025, but we know little about the effects of BNPL on consumers’ financial health. Using banking data for 10.6 million U.S. consumers, we find that new BNPL users experience rapid increases in overdraft charges and credit card interest and fees, as compared to non-users. An instrumental variable exploiting consumers’ pre-BNPL shopping habits increases the plausibility of BNPL having a causal negative effect on users’ spending habits and financial health. Our results contribute to the academic literature by expanding our understanding of a major development in consumer credit, and indicate that regulators should take seriously the concern that BNPL plausibly has negative welfare implications.

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 (September 27, 2022). Available at SSRN: https://ssrn.com/abstract=4230633 or http://dx.doi.org/10.2139/ssrn.4230633

Ed DeHaan

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

University of Washington - Department of Accounting ( email )

224 Mackenzie Hall, Box 353200
Seattle, WA 98195-3200
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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