Survey Finds Buy Now Pay Later Users More Likely to Overdraft

A recent analysis of Morning Consult data found substantial overlap between consumers who overdraft their accounts and those who use “buy now, pay later” (BNPL) products. In January, 15 percent of all adults overdrafted a bank or credit union account whereas 33 percent of BNPL users overdrafted. BNPL usage peaked in December 2021, with 23 percent of U.S. adults using the service. 

While it’s not clear that BNPL usage is actually causing overdrafts, Morning Consult found that BNPL users tend to be young adults, Black, and Hispanic Americans. 30 percent of Gen Z and 28 percent of both Black and Hispanic Americans used a BNPL service at least once in January. 

According to a trade group, BNPL companies “perform soft credit checks to assess the likelihood of repayment.” They also deny access to BNPL products if there are insufficient funds and revoke access when borrowers become delinquent.

The survey question defined BNPL as “a short term lending option that allows customers to make purchases at retailers without having to pay the entire amount up front,” providing Afterpay, Klarna, Sezzle, QuadPay (now known as Zip), and Affirm as examples.

“If I was a regulator, I would be concerned that certain demographics are being taken advantage of in some shape or form,” said Michael Taiano, a senior director at Fitch Ratings.

Indeed, in recent months, the CFPB launched an inquiry into BNPL products and business practices, issuing orders to five companies to collect information on the risks and benefits of their products.