Buy Now Pay Later adoption rates have skyrocketed over the past year, as consumers flocked to this new service that offers flexibility, price certainty, and zero to low fees.
But misinformation about BNPL products muddies the water. It obscures the fact that these products are safe, transparent, and transformational for tens of millions of Americans who previously had to rely on high-cost credit cards or predatory credit products.
What is Buy Now Pay Later? It’s a low-cost and flexible payment option allowing consumers to pay for a purchase in four installments over six to eight weeks. BNPL providers using this model make the vast majority of their revenue from their merchant partners.
- The results speak for themselves: approximately 95% of BNPL users don’t experience late charges. Many consumers use BNPL to manage their cash flow for small-dollar purchases, and most users had five times the total purchase amount in their account when using the BNPL payment option.
- The results speak for themselves: approximately 95% of BNPL users don’t experience late charges. Many consumers use BNPL to manage their cash flow for small-dollar purchases, and most users had five times the total purchase amount in their account when using the BNPL payment option.
BNPL is fundamentally different from revolving debt products like credit cards or payday loans. That’s because BNPL companies only succeed when people make their payments. If users are late, they are shut off from further use of the product and must resolve their payment plan.
- In contrast, credit cards and payday lenders benefit from consumers who are late or do not satisfy their payments. In fact, credit card providers make the majority of their revenue from interest charges and have been found to cost customers up to 225% of the product purchase value in interest.
BNPL is regulated: BNPL providers follow applicable lending and licensure laws enforced by the Consumer Financial Protection Bureau, Federal Trade Commission, and various state regulators. All BNPL products are subject to consumer protection laws and regulations, including anti-money laundering, fair lending, credit reporting, debt collection, privacy, fair treatment of customers, and electronic fund transfers. They also are subject to similar state consumer protection laws.
What It Means: We should strengthen access to transformative fintech services like BNPL, not put up barriers that reduce consumer choice and make it harder for people to manage their money. We will continue to work closely with federal and state officials to help craft policies that allow consumers to continue using innovative payment options that help them achieve financial freedom and security.
Get the facts on Buy Now Pay Later in Financial Technology Association CEO Penny Lee’s op-ed in American Banker.