TROY, Mich.–Many consumers are turning to buy now, pay later (BNPL) solutions even though they believe it to be contrary to their own self-interests.
That’s just one of a number of interesting findings in a new analysis by J.D. Power.
“Whether the culprit is a steady diet of ominous news about the recently resolved debt ceiling crisis or the persistent (albeit improving) presence of inflation, customers are back in the doldrums about their finances,” J.D. Power is reporting, saying its newest data indicate customer satisfaction with their financial condition declined to levels not observed since December 2022, even as financial health scores remain steady.
“Against this backdrop, customers have become more receptive to alternative loan programs, with Buy Now, Pay Later (BNPL) options quickly gaining acceptance,” J.D. Power stated. “Interestingly, though, customers are turning to BNPL even as they believe it to be contrary to their own self interests.”
Piquing Their Interest
For a fourth consecutive month, there has been no noteworthy change in overall financial health. More than one-third (34%) of respondents are financially healthy, while 41% are vulnerable, J.D. Power noted.
“As customers try to manage their financial situations, BNPL programs have piqued their interest as an option to alleviate their stress,” the company said. “Overall, 80% of customers say they are aware of BNPL products, and many are utilizing these options. More than one-third (34%) say they have used a BNPL program in the past 90 days.”
Predictably, J.D. Power added in its analysis, customers who are overextended are most likely to use BNPL options (55%), but even 30% of customers that have healthy financial situations are utilizing BNPL.
‘Overextended & Stressed’
“For customers that haven’t used BNPL in the past 90 days, though, the overextended and stressed customers are less likely to be familiar with the products,” J.D. Power said. “Overall, only 31% are completely unfamiliar with BNPL.
Customer Perceptions Vary on Value of BNPL
When asked further about their experiences with BNPL, customers who recently used one of these products were more likely to have a positive attitude, J.D. Power said, reporting that just 36% of customers that used BNPL in the past 90 days said they “somewhat agree” or “strongly agree” that BNPL benefits the lender, compared with 47% that have not used BNPL.
‘Not Convinced’
“Interestingly, more than half (60%) of customers who are aware of BNPL say the option is helpful, but the majority (64%) of those customers don’t believe using the option improves their financial health,” the company said in its analysis. “Even customers that have recently used these products are not convinced that they have helped their financial situation. Less than half (44%) of customers who used BNPL in the past 90 days said they “strongly agree” or “somewhat agree” that it helped their financial health. That speaks volumes about the depths of some customers’ struggles, and the work that still needs to be done by BNPL lenders to sell the benefits of their products to customers.”
ENBL: Educate Now, Benefit Later
Even as overall financial health remains steady, J.D. Power said “it’s clear that customers are feeling a cumulative effect of the past two years.
“As a result, banks need to understand that beleaguered feeling and tailor their customer outreach and their product offerings to account for the fact that customers have been barely holding it together for a significant period,” the company continued. “BNPL is a reasonable option for some customers and might not be the right fit for others. As their primary financial partners, banks are uniquely positioned to help customers understand who stands to benefit from leveraging BNPL, and for those that don’t, presenting an alternative option that may be a better fit. If banks can do this successfully, they’ll be able to retain customers, increase the use of their in-house services, and build better relationships.”
Additional information on the survey is available here.
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