Buy Now, Pay Later Providers Should Do Their Part To Promote Responsible Spending
By Arad Levertov
CEO and co-founder of Sunbit, a technology company making the buying and selling experience stress-free for everyone, everywhere.
It’s a tough time for many buy now, pay later (BNPL) providers.
As the number of providers has grown, so have concerns about the risks associated with such payment options, including that too many people will use them for “wants”—like luxury vacations—rather than “needs,” ultimately racking up unnecessary debt.
That’s not good for anyone, including BNPL providers themselves. The collective mission should be to help consumers manage their finances and stress, not to hurt them or take advantage in any way.
In this challenging industry context, we decided to run a survey to understand how consumers are using and feeling about BNPL in the current economic climate, to best serve their needs. We partnered with The Harris Poll to survey over 2,000 U.S. adults online in early April. About 73% were at least somewhat familiar with BNPL, suggesting strong awareness.
As far as results, the good news is that across consumer groups, people feel positively toward BNPL and want to have these payment options available for a wide range of purchases. Beyond survey results, however, it’s important for consumers and BNPL players alike to encourage responsible use of flexible financing and ensure the industry evolves with people’s needs, for everyone’s benefit.
Consumers Want BNPL
What was heard loud and clear: people want BNPL for things that really aren’t optional—like getting their car fixed, dental treatments and eye care.
In the survey, 69% of U.S. consumer respondents said they were interested in BNPL to pay for necessary services. Perhaps not surprisingly, those who are feeling stressed by the current economic situation—intensified by rising inflation and falling stock prices (and thus declining retirement and other savings)—are more likely than the more fortunate, less-stressed consumers to want BNPL options for large purchases, at a rate of 74% versus 53%, respectively.
This makes a lot of sense in the broader financial context of the U.S. As was widely reported in recent years, many U.S. consumers can’t cover an unexpected $400 expense, so most would be expected to want access to flexible financing tools. Indeed, the survey showed that 79% of respondents have cut back on discretionary spending—“wants”—to save for things they truly need, whether gas or groceries. Even worse, two-thirds of consumers have delayed necessary services including home repair (27%) and dental work (27%).
But it’s not just those in more need who see the benefits of BNPL. In fact, the survey found that respondents with annual household incomes over $100,000 are more likely to say they are “very likely” to finance a necessary service in the next six months (18%) than households with incomes less than $75,000 (11%), possibly because higher-income households may be more willing to take on larger purchases in the near future.
People Feel Positively About BNPL
It’s evident that people want to have BNPL options. But how do they feel about its usage, especially given some of the concerns expressed in the court of public opinion?
The survey suggested that, overall, those who had used BNPL felt very positively about it, whether they took advantage of the financing option for discretionary or non-discretionary purchases. For example, those who used the payment option for necessities reported positive sentiment about it including relief (63%), happiness (47%), and excitement (39%); only 10% reported feelings of regret or stress.
Of those who had used BNPL before, the majority (76%) have used this payment option more than once, with an average of five transactions completed. That suggests some measure of trust related to BNPL.
A Shared Responsibility
On one hand, the results of our survey indicate that BNPL appeals to a wide range of consumers as a more flexible payment option that can help them reduce debt and stress related to diverse types of purchases.
On the other hand, the industry has to take seriously some of the downsides of BNPL expressed in the media, as part of an ongoing, concerted effort to place customer needs at the center. Ideally, this starts with helping people take a thoughtful approach to credit use specifically and spending in general. BNPL providers shouldn’t contribute to a dangerous trend that gets some consumers in over their heads financially and should never try to mislead consumers into misconstruing wants as needs.
But when spending is unavoidable—as with dental work, car repair or appliance replacement—BNPL can be an important option. Keeping the BNPL offering customer-focused—offering flexibility, transparency, lower interest rates than typical credit cards, high approval rates and no gotchas like hidden fees—is critical to ensuring that everyone in the ecosystem—providers, customers and merchants—benefits. And that is the key to a lasting solution in an ever-more challenging market landscape.