Older consumers might see fractured payments on chicken thighs as a sign of financial precarity, but many young people find BNPL’s nuances liberating, Di Maggio told me.
“They felt absolutely nothing negative,” she said, “which blew my mind.”
Ghosh had assumed people would tend to reserve BNPL “for hedonic things that are harder to justify”-until a control group in one of her studies happily used it on groceries. Even the most prosaic items were fair game for financing. Conversely, when given the option between BNPL and debit, shoppers made no moral distinction. “Credit cards are always the worst,” she said. Ghosh’s research involves polling consumers about which method of spending makes them feel the most guilty. “We have sort of indoctrinated younger borrowers in the idea that having credit-card debt is bad,” Anastasiya Ghosh, a University of Arizona marketing professor, told me. Government agencies such as the Consumer Financial Protection Bureau also strongly discouraged overextension. The elimination of housing wealth for millions of Americans fueled a credit crunch, in which banks tightened credit standards and sharply curtailed their lending.
Following the ’08 financial crisis, personal debt became a public bogeyman. He said that Gen Z was skeptical of credit cards, possibly because many of them had seen their parents sink into debt. “We found that most of the people that use buy now, pay later either don’t have or don’t use a credit card,” Marco Di Maggio, an economist at Harvard, told me. The widespread embrace of this kind of lending system says a lot about Americans’ relationship to debt-particularly among the younger borrowers who made BNPL popular (about half of BNPL users are 33 or under). That’s still a small fraction of the amount charged to credit cards, but the fast adoption of BNPL points to its mainstream appeal. Read: Why is there financing for everything now?įrom 2019 to 2021, the total value of buy-now, pay-later (or BNPL) loans originated in the United States grew more than 1,000 percent, from $2 billion to $24.2 billion. And though Americans have used layaway programs since the Great Depression, today’s pay-later plans flip the order of operations: Rather than claiming an item and taking it home only after you’ve paid in full, consumers using these modern payment plans can acquire an item for just a small deposit and a cursory credit check. During the summer of 2020, at the height of the coronavirus pandemic, they bought enough Peloton products to account for 30 percent of Affirm’s revenue. People are buying cardigans with this kind of financing. In a few short years, financial-technology firms such as Affirm, Afterpay, and Klarna, which allow consumers to pay for purchases over several interest-free installments, have infiltrated nearly every corner of e-commerce. Putting a banh mi on layaway-this is the world that “buy now, pay later” programs have wrought. As familiar as Americans are with the concept of credit, many of us, upon encountering a sandwich that can be financed in four easy payments of $3.49, might think: Yikes, we’re in trouble.
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