Report: Financially Underserved Consumers 3X More Likely To Use BNPL Options At Checkout

The digital shift has created a range of new options for consumers who want better customer experiences, including new ways to pay.

Buy now, pay later (BNPL) is an increasingly popular installment payment option that has been upgraded for the digital age. Consumers used to pay for items on layaway, but today BNPL has transformed installment-based purchasing to include perks, such as the ability to pay for travel and a potential boost to credit scores.

Buy Now, Pay Later: The Financial Self-Care Revolution Report, a PYMNTS collaboration with Sezzle, presents findings from a survey of 7,024 consumers statistically representative of the adult consumer population. PYMNTS found that BNPL has increased in popularity among consumers of varied economic backgrounds and users of BNPL see it as a valuable financial “self-care” tool.

According to the report, consumers are facing numerous challenges in accessing traditional credit. Credit rejections and applications for credit line increases are at an all-time high. Adding to these challenges is the fact that many consumers will no longer consider credit cards as a way to buy the things that they want. PYMNTS’ research revealed that many consumers with diverse credit profiles are no longer interested in using traditional credit cards because of high fees and their belief that credit cards encourage poor spending habits.

Many consumers are therefore turning to credit alternatives like BNPL. Even financially “worry-free” consumers are cutting the plastic, the survey revealed. Many consumers cite a fear of overspending, high fees and interest rates among the top reasons why they do not want credit cards. PYMNTS’ research found that 40 percent of worry-free consumers who did not have a credit card in the last 12 months reported that they did not want to use credit cards because the cards encouraged them to spend money.

While many of the 29 million American consumers who have used BNPL in the last 12 months had experienced financial challenges, PYMNTS found that BNPL’s ability to spread payments over time and its ease of use were the most cited reasons for choosing the method, regardless of the consumers’ level of financial inclusion.

Still, for some consumers, BNPL provides a financial lifeline, enabling them to purchase necessities that they would not be able to afford otherwise. This, in turn, provides merchants with access to new audiences of consumers who are normally unable to attain retail credit cards. The financially underserved are still highly motivated to achieve greater financial inclusion — participation in financial services and access to payment options like credit to buy necessities and make major purchases — and BNPL provides a rapid pathway to retail shopping for larger purchases and helps rescue blemished credit histories.

BNPL users are superfans who show high levels of affinity for the service. PYMNTS’ research found that 64 percent of consumers who mostly prefer one leading BNPL program believe that BNPL providers are more trustworthy service providers than banks or credit card companies. Overall, 48 percent of BNPL users agreed with the statement that “BNPL providers are more trusted service providers than banks or credit card companies.”

To learn how BNPL is transforming consumer’s shopping choices, download the report.