4
card. Consequently, BNPL financing may be particularly attractive to consumers with lower
credit scores because the alternative average percentage rate (APR) interest on credit card debt
is particularly high for this group compared to consumers with higher credit scores.
This study has three notable limitations. First, identification of BNPL use is based solely on
consumer self-reporting and reported for only one point in time. Since these loans do not appear
in the credit bureau data, we are unable to cross-reference these responses, but some evidence
suggests that consumers may report traditional installment loans as BNPL rather than the pay-
in-four product.
5
This confusion likely arises because of the widespread marketing of products
similar to BNPL and the fact that some of the same firms offering the pay-in-four product also
offer traditional installment financing.
6
For this reason, we expect that BNPL use is measured
with some error. Second, because the sample frame for the Making Ends Meet survey
encompasses consumers with a credit record, this report necessarily omits information on the
estimated 11 percent of consumers without a credit record. Third, the data in this report do not
allow us to distinguish the direction of causality – namely whether consumers in distress are
more likely to use BNPL, for instance, in order to substitute away from high-interest loans that
they already have, or whether BNPL use leads consumers to increase borrowing using other
non-BNPL products. This question remains an important area for future research.
The time period covered by the survey and CCP was also a tumultuous economic period. Both
online shopping and BNPL use expanded rapidly since 2019. Many new BNPL borrowers may
be experimenting with a new product and others may start to use it after the survey. In addition,
the COVID-19 pandemic changed many consumers’ finances.
7
Many people spent less and
government support, including Economic Impact Payments and expanded unemployment
benefits, increased incomes. These actions caused savings to increase and debt to decrease. Our
results may not be representative of BNPL use as the product continues to evolve or during less
tumultuous economic times.
Despite these limitations, our results show that BNPL is mostly used by consumers with
substantial access to and use of other forms of credit. However, most of these credit sources
would be much more expensive than BNPL for the typical user, so BNPL appears to be a less
expensive borrowing option, not the only option.
5
See Tom Akana, “Buy Now, Pay Later: Survey Evidence of Consumer Adoption and Attitudes,” (June 2022) available
at
https://www.philadelphiafed.org/consumer-finance/consumer-credit/buy-now-pay-later-survey-evidence-of-
consumer-adoption-and-attitudes (hereinafter Akana 2022).
6
Affirm and Klarna are two examples.
7
Scott Fulford and Cortnie Shupe, “Consumer finances during the pandemic,” CFPB Data Point No. 2021-3,
December 2021, available at:
https://files.consumerfinance.gov/f/documents/cfbp_making-ends-meet-survey-
insights_report_2021-12.pdf.