NEW YORK—The buy now, pay later (BNPL) market just keeps getting larger, with new data indicating the financing option was a big driver of holiday sales.
The number of BNPL loans grew more than tenfold during the pandemic, a U.S. government study shows, from almost 17 million in 2019 to 180 million in 2021, NPR reported.
In addition, a new survey commissioned by Ally Bank found that double the number of Americans used BNPL financing solutions in December compared with just four months ago, Yahoo Finance reported.
“The appeal is obvious. At online checkout, most BNPL companies typically let you pay a quarter of the bill—or less—as long as you set auto payments for the rest: no interest, no credit history required,” added NRP in its report.
Retailers Pay More, But…
The growth is occurring even though purchases financed via BNPL cost retailers more.
“In fact, stores might pay 2% fees for credit-card companies to process transactions, but they pay up to 8% fees to buy-now-pay-later providers. Financially, that would only make sense if buy now, pay later encourages people to buy more than they would otherwise,” NPR concluded.
Added Yahoo Finance, “The common concern among shoppers then and now: inflation, as a growing number of American families shift their spending habits to stretch their budgets, making them more vulnerable to potential late payments and fees,” Yahoo finance said.
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