Understanding Consumer Demand for “Buy Now, Pay Later”

Aidala, Felix; Koşar, Gizem; Mangrum, Daniel; Van der Klaauw, Wilbert

doi:10.59576/sr.1167

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Understanding Consumer Demand for “Buy Now, Pay Later”

Abstract: Consumer demand for “Buy Now, Pay Later” (BNPL) has surged, but the specific attributes consumers value remain unclear. We conduct a novel probabilistic stated choice experiment varying BNPL attributes across hypothetical scenarios to estimate consumers’ underlying preferences and their willingness to pay (WTP) for each feature. Consumers have a negative WTP for the standard bundle, on average, but younger and lower income consumers have stronger demand. Simulating consumer demand with estimated preference parameters reveals that most shifts away from the standard BNPL bundle reduce demand and create a more negatively selected pool of BNPL users, especially when interest is charged.

JEL Classification: G51; G41; C93; R22;

https://doi.org/10.59576/sr.1167