The Rise of E-Wallets and Buy-Now-Pay-Later: Payment Competition, Credit Expansion, and Consumer Behavior

60 Pages Posted: 13 Apr 2023 Last revised: 26 Jan 2024

See all articles by Wenlong Bian

Wenlong Bian

Sungkyunkwan University

Lin William Cong

Cornell University - Samuel Curtis Johnson Graduate School of Management; National Bureau of Economic Research (NBER)

Yang Ji

Sun Yat-sen University (SYSU) - School of Business

Date Written: March 31, 2023

Abstract

The past decade has witnessed a phenomenal rise of digital wallets, which is further accelerated by the COVID-19 pandemic. Such e-wallets provide not only a conduit to external bank accounts but also internal payment accounts, including the popular Buy-Now-Pay-Later (BNPL). We examine, for the first time, e-wallet transactions matched with merchant and consumer information from a world-leading e-wallet provider, with around one billion users globally and a business model that other providers converge to. We document that internal payment options, especially BNPL, dominate both online and on-site transactions. BNPL serves as “digital cash” in mediating small-valued transactions and purchases of non-durable goods, while expanding credit access to underserved consumers, thanks to its adoption in two-sided payment markets. Exploiting a randomized experiment, we also find that e-wallet credit through BNPL substantially boosts consumer spending without incurring interest charges or delinquent behavior. These findings crucially depend on the cross-sale capacity and inherent incentives of super-app ecosystems, which foster complementarity between credit provision and payments. The insights inform economies transitioning from cash-heavy to cashless or featuring app-driven platforms where digital payments and FinTech credit see the largest growth and potential.

Keywords: Cashless, Consumer Credit, FinTech, Financial Inclusion, Mobile Wallet

JEL Classification: E42,G20, G23, G51

Suggested Citation

Bian, Wenlong and Cong, Lin and Ji, Yang, The Rise of E-Wallets and Buy-Now-Pay-Later: Payment Competition, Credit Expansion, and Consumer Behavior (March 31, 2023). Proceedings of the EUROFIDAI-ESSEC Paris December Finance Meeting 2023, Available at SSRN: https://ssrn.com/abstract=4407023 or http://dx.doi.org/10.2139/ssrn.4407023

Wenlong Bian

Sungkyunkwan University ( email )

Sungkyunkwan University
Seoul, Seoul 03063
Korea, Republic of (South Korea)

Lin Cong

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

HOME PAGE: http://www.linwilliamcong.com/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yang Ji (Contact Author)

Sun Yat-sen University (SYSU) - School of Business ( email )

No. 66, Gongchang Rd., Guangming Dist.
Shenzhen, Guangdong 518107
China

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