Consumers may be becoming more savvy about using buy now, pay later (BNPL), also referred to as pay-over-time options. Most people who used longer-term payment plans in the past year chose to pay off the loan over six months or more, even when they could afford to pay upfront.
Research from Affirm suggests that consumers are increasingly using such payment methods as a way to manage their cashflow. This aligns with separate data from Bankrate, which shows that BNPL usage is not primarily among those who can’t afford their purchases, but remains relatively consistent across all income levels. According to Bankrate, 31% of respondents in both the highest and lowest annual household income brackets have used BNPL at least once.
A New Financial Strategy
The Affirm study found that over half of U.S. consumers believe that longer-term payments with clear terms help them make smarter financial decisions for larger purchases. Evidence shows these plans are becoming just another payment option, depending on how well they align with consumers’ shopping habits.
Nearly two-thirds of pay-over-time users say they value interest-free payment offers as much as, or more than, traditional discounts.
Seeking Clarity on Terms
If there’s anything deterring consumers from using BNPL plans, it’s uncertainty around the terms. Affirm found that more than half of respondents avoided certain payment methods due to concerns over hidden fees like late charges and interest. Nearly all respondents said it’s important for financial institutions to provide transparent terms without hidden fees.
Only recently have BNPL lenders been required to follow some of the same rules as credit card companies, including clearer disclosures and the right to dispute charges. Last year, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule subjecting the industry to regulations currently governing credit card products, requiring BNPL vendors to provide periodic statements much like their credit card counterparts. Given the current administration’s rollback of many CFPB initiatives, it is unclear how long that regulation will remain in force.
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