Who Uses “Buy Now, Pay Later?”

Posted: 26 Sep 2023

See all articles by Felix Aidala

Felix Aidala

Federal Reserve Banks - Federal Reserve Bank of New York

Daniel Mangrum

Federal Reserve Banks - Federal Reserve Bank of New York

Wilbert van der Klaauw

Federal Reserve Bank of New York; IZA

Date Written: September 26, 2023

Abstract

“Buy now, pay later” (BNPL) has become an increasingly popular form of payment among Americans in recent years. While BNPL provides shoppers with the flexibility to pay for goods and services over time, usually with zero interest, the Consumer Financial Protection Bureau (CFPB) has identified several areas of potential consumer harm associated with its growing use, including inconsistent consumer protections, and the risk of excessive debt accumulation and over-extension. BNPL proponents have argued that the service enables improved credit access and greater financial inclusion, with approval being quick and relatively easy. More research is needed to assess the overall risks and benefits of BNPL for consumers. As a first step, we draw on new survey data to examine the background and circumstances of consumers who receive and take up BNPL offers. We find both the availability and use of BNPL to be fairly widespread but see disproportionate take-up among consumers with unmet credit needs, limited credit access, and greater financial fragility. While BNPL expands financial inclusion, especially to those with low credit scores, there is a risk that these payment plans contribute to excessive debt accumulation and over-extension.

To view post: https://libertystreeteconomics.newyorkfed.org/2023/09/who-uses-buy-now-pay-later/

To view the New York Fed Economic Inequality Research Series: https://www.newyorkfed.org/research/heterogeneity-series

Keywords: BNPL, credit access, household borrowing, financial inclusion, inequality

JEL Classification: D14

Suggested Citation

Aidala, Felix and Mangrum, Daniel and van der Klaauw, H. Wilbert, Who Uses “Buy Now, Pay Later?” (September 26, 2023). Liberty Street Economics , Available at SSRN: https://ssrn.com/abstract=4584628

Felix Aidala

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Daniel Mangrum

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

H. Wilbert Van der Klaauw (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5916 (Phone)
212-720-1844 (Fax)

IZA ( email )

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