Millions of U.S. consumers have used Buy Now, Pay Later (BNPL) loans with 89% stating they are satisfied or very satisfied with the credit product. A survey from TransUnion (NYSE: TRU) also revealed that 85% of BNPL users would recommend such loans to others.
The research, conducted among 1,200 U.S. consumers in the second quarter of 2024, explored the general “usage and behavior of consumers around BNPL loans.”
BNPL is an installment loan established “at the point-of-sale for the purpose of financing a one-time, unsecured retail transaction.”
It allows consumers to finance a purchase “with multiple, equal payments instead of one lump sum.”
More than 100 million consumers “have used BNPL and the number of users is expected to grow as TransUnion’s research found nearly 40% of those who haven’t used these loans are likely or very likely to use them in the future.”
Notably, a higher 53% of non-users would “be likely or very likely to use BNPL if it had the potential to have a positive impact on credit scores.”
TransUnion is leading the effort with lenders “to facilitate and accelerate BNPL credit reporting to create visibility to this growing segment of the financial services industry.”
Consumers deserve to have “their BNPL credit included in their credit history, which could lead to more access to credit for a generation of consumers who have embraced BNPL as an alternative to traditional borrowing.”
The research indicates that “the BNPL industry is attracting a large base of consumers who say that the ability to easily track payments and balances attracts them to these products – once they are able to see their BNPL loans in their credit file, that will be even easier.”
TransUnion launched new capabilities to “accurately capture and reflect the unique features of BNPL loans in 2022.”
The new methodology will account “for the high frequency nature of such loans.”
The survey findings underscore the high usage patterns “of BNPL loans with 80% of users utilizing BNPL more than once a year.”
This is very different from how current scores “expect products like installment loans to be used, so the changes were necessary.”
Liz Pagel, senior vice president and head of consumer lending at TransUnion said:
“The new reporting methodology will allow models to give consumers credit for making on-time payments on their BNPL loans without penalizing them for using them more frequently than typical installment products. Today, three in four BNPL users believe that using BNPL will impact their credit scores positively.”
As more and more consumers across different age ranges and credit scores “use BNPL products responsibly, the loans’ inclusion on the credit file will bring in more consumers who are currently either left out of the system entirely, or who are struggling to rebuild credit.”
The survey also reflected a lack of consumer understanding of “the current state of BNPL bureau reporting.”
Approximately three in 10 consumers (28%) who “use BNPL cited being concerned about its impact on credit scores. Today, the vast majority of BNPL loans are not reported to the CRAs.”
Looking at both users and non-users of BNPL products, the sentiment around credit bureau reporting was positive:
- Over half of BNPL users across high-, medium-, low-income tiers ranked the ability to add payment history to build credit scores as an important or very important feature (low income – 56%, medium – 61%, high – 64%)
- 86% of BNPL users would be very likely or likely to use BNPL products if it could positively impact credit scores.
- 53% of non-users said that they would be likely or very likely to use BNPL products if it could have a positive impact on credit scores.
Pagel added:
“One of the key takeaways from the research is that BNPL is here to stay. Consumers find value in the product and they overwhelmingly like the experience of using it. While the financial services industry is clamoring for visibility into BNPL data, consumers see the benefits of credit reporting as well. This growing industry could become a force for financial inclusion as the data begins to enter the credit reporting ecosystem.”
TransUnion is ready to help consumers understand “the current and future states of BNPL reporting.”
Survey Methodology
U.S. online research panel “of 1,200 respondents (500 non-BNPL users and 700 BNPL users).”
The survey was conducted “between 30th – 31st May 2024 and distributed through the TolunaStart platform.”
The survey was designed in collaboration “with key business stakeholders.”
The research results are “unweighted and statistically significant at 95% confidence level with an error margin of +-4.4% and +-3.7% for the samples of 500 non-BNPL users and for 700 BNPL users, respectively.”