Americans With Lower Credit Scores Use BNPL More Often

New research from the Federal Reserve Bank of New York found that Americans already facing financial hardship are more frequent and intensive users of “buy now, pay later” (BNPL) offerings, with the majority of them utilizing BNPL services five or more times a year. Researchers found that they account for roughly one-third of total BNPL users.

“‘Financially fragile’ individuals—those who have a credit score under 620 or were declined for a credit application or fell delinquent on a loan in the past year—are more than three times as likely as other, more financially stable, individuals to use BNPL multiple times a year,” wrote the researchers in a Liberty Street Economics blog post, according to CNN.

Nearly 60 percent of financially fragile BNPL consumers have used the service five or more times a year, with almost 30 percent using BNPL offerings 10 or more times annually, compared to just over 20 percent and 10 percent, respectively, for consumers with more financial stability.

Over 62 percent of financially fragile BNPL users conducted transactions for less than $250, compared to 43.6 percent of other consumers. Those who are more financially stable are more likely to use BNPL for bigger purchases, as 17.3 percent of those BNPL users conducted transactions between $1,750 and $2,000, compared to just 4.9 percent of financially fragile consumers.

The New York Fed researchers noted that their findings provide further evidence that BNPL is more attractive to those who have a harder time obtaining credit, and that the first time someone uses a BNPL service is likely not the last.

“Across levels of financial stability, it is rare for people to use BNPL just once,” they wrote. “Indeed, about 72 percent of financially stable users and 89 percent of financially fragile users have made multiple BNPL purchases over the past 12 months.”