Researching new financial products: using survey evidence to gain insight into buy now, pay later

Tom Akana and Valeria Zeballos Doubinko

Abstract

We describe the efforts made to understand the effects of a new financial product early in its life cycle, when traditional data on market penetration and administrative performance is scarce. Specifically, through the use of unique consumer survey data, we examine consumers’ use of “buy now, pay later” (BNPL) and the potential effects on their credit. BNPL is a deferred payment tool that allows consumers to split transactions into four payments over six weeks. When it came to the attention of the payments markets in 2019, it was offered primarily by fintech companies and advertised to consumers as free from fees and credit checks. These providers typically did not report a consumer’s use of BNPL and subsequent repayment behavior to credit bureaus, which made studies of BNPL users and their credit more challenging. In this analysis we use unique survey data to gain insight into the characteristics of BNPL users during the early growth of the market.