The Use and Disuse of FinTech Credit: When Buy-Now-Pay-Later Meets Credit Reporting

Abstract

How does information sharing affect consumers' usage of FinTech credit? Using a unique dataset of "Buy Now, Pay Later (BNPL)" users from a large digital platform and exploiting a credit reporting policy change, we document that consumers significantly reduce their usage of BNPL credit when the BNPL lender becomes subject to credit reporting regulation. This reduction is more pronounced among borrowers with previous default records, who also become more disciplined in repayment behaviors, than those without such records. The decrease in BNPL usage also leads to a reduction in online consumption, supporting the financial constraint hypothesis. Our results suggest that information sharing can help alleviate overborrowing and overspending, with stronger effects observed among younger borrowers, those who previously consumed more, or those with credit cards. We also highlight the synergies between BNPL lending and Big Tech platforms' ecosystems, which imperfectly substitute for formal enforcement institutions.

Keywords: FinTech, BNPL, consumer credit, information sharing, credit reporting, overborrowing, Big Tech platforms

JEL Classification: G21, G51, G28, G53