Buy Now Pay (Pain?) Later

Author:

deHaan Ed1ORCID,Kim Jungbae2ORCID,Lourie Ben3ORCID,Zhu Chenqi3ORCID

Affiliation:

1. Stanford Graduate School of Business, Stanford University, Stanford, California 94305;

2. School of Accountancy, Singapore Management University, Singapore 178900;

3. The Paul Merage School of Business, University of California, Irvine, Irvine, California 92697

Abstract

“Buy-now-pay-later” (BNPL) is a relatively unregulated FinTech innovation that provides consumers with easy access to credit for retail purchases. BNPL spending is projected to reach $1 trillion by 2025, but we know little about its effects. Using banking data for 10.6 million U.S. consumers, we investigate the effects of BNPL on leading indicators of users’ financial health. We find that new BNPL users experience rapid increases in bank overdraft charges and credit card interest and fees compared with nonusers, consistent with BNPL facilitating overborrowing. An instrumental variable exploiting consumers’ pre-BNPL shopping habits bolsters our inferences. Our results inform regulatory investigations into the effects of BNPL on users’ financial health and expand academia’s understanding of an important consumer credit innovation. This paper was accepted by Camelia Kuhnen, finance. Funding: E. deHaan acknowledges financial support from Stanford University; B. Lourie and C. Zhu acknowledge financial support from University of California Irvine. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.03266 .

Publisher

Institute for Operations Research and the Management Sciences (INFORMS)

Cited by 3 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

1. Beyond credit cards: A TEP perspective on buy-now-pay-later adoption;Journal of Global Scholars of Marketing Science;2024-09-09

2. What influences demand for Buy Now, Pay Later credit?;Economics Letters;2024-09

3. Buy Now, Pay Later Loans, Social Norms, and Consumer Indebtedness;Journal of Behavioral Finance;2024-08-04

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