Financially vulnerable more likely to use BNPL, research reveals

According to research from the Financial Health Network, one in four users of Buy Now, Pay Later (BNPL) services is financially vulnerable, and struggle to make payments.

Financial Health Network’s survery “Buy Now, Pay Later: Implications for Financial Health,” set out to understand who uses BNPL and their experiences with the service.

Almost half (47%) said they would not have made a purchase or spent more than they otherwise would have spent had BNPL not been available. This includes more than a third (34%) of users who would not have made the purchase had BNPL not been available.

At the same time, 92% of users reported no difficulty making payments and 99% stated that they understood the terms and conditions of the product.

As a point-of-sale loan, some view BNPL as a tech alternative to credit cards. However, BNPL companies have been accused of misleading their customers and exploiting financially vulnerable consumers. Earlier in the year, FinTech Global spoke to leading BNPL firms such as Klarna, Affirm and Zilch, to see what they had to say in response to these criticisms.

The survey also found that younger and less financially healthy households are nearly four times more likely to use BNPL than financially healthy households.

In addition, over 20% of BNPL users do not use credit cards and more than 40% report having subprime credit scores.

Meghan Greene, director of research at  Financial Health Network, said, “Buy Now Pay Later could be a mixed bag for consumers–on the one hand it provides a convenient and low-cost way for consumers to finance purchases, but there are customers who are using BNPL to make purchases they would not otherwise make.

“It’s still too early to know the full impact of BNPL on the financial health of consumers, but we do see potential warning signs in the number of consumers, particularly those who are already financially vulnerable, who report struggling to make repayments.”

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