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As “Buy Now, Pay Later” (BNPL) rapidly gains popularity, many retailers wonder about what this means for their bottom line. New research analyzed the purchase behavior of 275,000 consumers to understand BNPL’s effect on consumer spending. The researchers find that BNPL drives both an increase in purchase likelihood and 10% larger basket sizes. These effects are especially great for consumers who historically made smaller purchases. The study also identifies BNPL’s unique appeal: by breaking down payments into installments, BNPL gives consumers a greater sense of control over their budgets. As a result, BNPL purchases feel less financially constrained. This research offer insights into the implications for retailers and reflects on the emerging challenges of BNPL.
Today, the widespread ability to use Buy Now, Pay Later (BNPL) schemes like Afterpay and Klarna in online retail is transforming how consumers pay for purchases. Rather than relying on debit or credit cards, consumers are increasingly using BNPL services to spread payments across interest-free installments. However, BNPL is costly to retailers, and policymakers have begun to regulate BNPL due to its broad usage and potential impacts on consumers.
