Buy now pay (pain?) later

Author

Ed deHaan, Stanford University
Jungbae KIM, Singapore Management UniversityFollow
Ben LOURIE, University of California, Irvine
Chenqi ZHU, University of California, Irvine

Publication Type

Journal Article

Version

publishedVersion

Publication Date

8-2024

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 for10.6 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.

Keywords

BNPL, FinTech, Consumer credit, Household accounting, Household finance, Regulation

Discipline

Accounting | E-Commerce | Finance and Financial Management

Research Areas

Corporate Reporting and Disclosure

Publication

Management Science

Volume

70

Issue

8

First Page

5586

Last Page

5598

ISSN

0025-1909

Identifier

10.1287/mnsc.2022.03266

Publisher

Institute for Operations Research and Management Sciences

Citation

deHaan, Ed; KIM, Jungbae; LOURIE, Ben; and ZHU, Chenqi. Buy now pay (pain?) later. (2024). Management Science. 70, (8), 5586-5598.
Available at: https://ink.library.smu.edu.sg/soa_research/2056

Copyright Owner and License

Authors

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-Share Alike 4.0 International License.

Additional URL

https://doi.org/10.1287/mnsc.2022.03266