Discussion Paper

How and Why Do Consumers Use “Buy Now, Pay Later”?

Abstract: In a previous post, we highlighted that financially fragile households are disproportionately likely to use “buy now, pay later” (BNPL) payment plans. In this post, we shed further light on BNPL’s place in its users’ household finances, with a particular focus on how use varies by a household’s level of financial fragility. Our results reveal substantially different use patterns, as more-fragile households tend to use the service to make frequent, relatively small, purchases that they might have trouble affording otherwise. In contrast, financially stable households tend to not use BNPL as frequently and are more likely to emphasize that BNPL allows them to avoid paying interest on credit-finance purchases. We explore below what drives these differences and consider the implications for future BNPL use.

Keywords: Buy Now Pay Later (BNPL); credit; consumer finance; household borrowing; inequality; financial inclusion;

JEL Classification: D14;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2024-02-14

Number: 20240214