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Buy Now Pay (Pain?) Later

Author

Listed:
  • Ed deHaan

    (Stanford Graduate School of Business, Stanford University, Stanford, California 94305)

  • Jungbae Kim

    (School of Accountancy, Singapore Management University, Singapore 178900)

  • Ben Lourie

    (The Paul Merage School of Business, University of California, Irvine, Irvine, California 92697)

  • Chenqi Zhu

    (The Paul Merage School of Business, University of California, Irvine, Irvine, California 92697)

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 for 10.6 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.

Suggested Citation

  • Ed deHaan & Jungbae Kim & Ben Lourie & Chenqi Zhu, 2024. "Buy Now Pay (Pain?) Later," Management Science, INFORMS, vol. 70(8), pages 5586-5598, August.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:8:p:5586-5598
    DOI: 10.1287/mnsc.2022.03266
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