“Buy now, pay later” lures young, low-income consumers, new data shows

The share of Americans heavily using "buy now, pay later" loans has been steadily increasing since the pandemic
By Robin Amos
•
19 June 2024
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Although the frenzy of "buy now, pay later" (BNPL) loans seems to be waning, the biggest spenders remain hooked, new data shows.

According to internal data from Bank of America, spending among “heavy” BNPL-using households, or those that make 20 or more such payments per month, has risen 15% since 2019.

While big spenders continue to splurge, medium and light BNPL users appear to have tightened their belts.

“Adoption of buy now, pay later is slowing year-over-year, with the share of Bank of America customers with a BNPL payment increasing by only half a percentage point in March 2024 compared to a one percentage point increase the previous year,” wrote Bank of America economist Joe Wadford.

Of all generations, Millennials comprise the largest share of households that made a BNPL payment as of March, followed by Gen X and Gen Z, with the latter group seeing the largest jump in BNPL use.

In terms of earnings, lower-income households made more use of BNPL services than any other income bracket. Nearly half of households that used BNPL in March 2024 earned less than $50k.

This accords with research by the New York Federal Reserve published earlier this year, which found nearly two-thirds of financially insecure borrowers had used BNPL at least five times in the past year to make ends meet.

They were also about three times more likely to use these loans compared to well-off households.

As Creditnews reported at the time, around two-thirds of financially fragile borrowers use such loans to make purchases below $250. The segment of users who are financially better off can spend up to $2,000.

"The financially fragile are disproportionately likely to use BNPL at higher frequencies and have embraced it as a regular payment option," the study said.

BNPL providers keep expanding

Though the overall use of BNPL services may have fallen, major retailers have shown they are still keen to expand their offerings.

In April, Walmart’s backed fintech startup One began offering BNPL loans for big-ticket items, while last year Amazon partnered with Citi to let the bank’s cardholders pay in installments.

Meanwhile, Klarna expanded its partnership with Expedia Group in April, enabling the latter’s customers to make flexible payments on flights and accommodation.

The Swedish-based platform is reportedly in talks with banks for a $20 billion IPO, potentially as soon as the third quarter of this year, according to Bloomberg.

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