BNPL Usage May Increase with “Reasonable” Repayment Terms, Study Finds

It’s been several years since financial services upstarts reimagined buy now pay later (BNPL) as a point-of-sale (POS) payment method.

Since then, this once-obscure way of transacting has “been placed front and center at the checkout by merchants worldwide, and 28% of U.S. consumers now say they’ve used it at least once in the previous 90 days.”

But who, exactly, are these BNPL customers and why are they choosing this form of payment over countless other options? While many reports have “suggested that BNPL has been most attractive to financially vulnerable consumers who are already overextended on their credit cards, the real BNPL customer profile is decidedly more nuanced.”

In fact, according to findings from the J.D. Power 2023 POS Choice Satisfaction Study, BNPL is attracting consumers “from across the financial health spectrum, and most consumers are drawn to it for the same primary reason—they like the repayment terms.”

Both credit cards and BNPL allow consumers “to make purchases they may not be able to pay for immediately.”

However, differences in consumer perceptions “about repayment terms help explain why BNPL is attaining prominence at the checkout.” One-third (33%) of consumers indicate a primary driver for using BNPL is “repayment terms are reasonable,” more than any other factor and significantly more than the 6% of consumers who say it’s a primary reason they use credit cards.”

Having reasonable repayment terms may also “explain the second most common reason consumers use BNPL: budgeting/avoiding overspending and debt. One-fourth (25%) of consumers indicate they use BNPL because it is helpful for budgeting, while only 8% say the same about credit cards.”

As one J.D. Power survey respondent wrote, “[My BNPL plan] is easy to use. There are no complicated terms. It does exactly what it says it will. It’s split into four payments…and that’s that. No tricks, gimmicks, or little details lurking.”

Industry watchers have been rightfully “concerned about the potential for BNPL to make it easy for consumers to add to their already bloated debt loads.”

Fifty-five percent (55%) of U.S. consumers “are currently at risk of being unable to cover their basic financial needs according to the August J.D. Power U.S. Polaris Pulse report.”

Rising costs and increasing debt burdens are “affecting people’s ability to pay, and proliferating BNPL loans could worsen matters.”

Unsurprisingly, these at-risk consumers “are more likely to use BNPL than others.”

According to the J.D. Power data, 32% of consumers at risk of being unable to cover their basic financial needs used BNPL in the previous 90 days; this is higher than the 28% usage rate among the total population.”

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