The New York Fed has an interesting blog called Liberty Street Economics. The blog writes about a number of different social economics and general economics topics. A lot of the info the researchers share is quite interesting as it is the New York Fed.
Liberty Street Economics has written about Buy Now Pay Later (BNPL) a few times. A recent article titled How and Why Do Consumers Use “Buy Now Pay Later”? had some interesting stats and info on consumer behavior when using BNPL services.
Here are the 13 key data points from the article regarding the usage of BNPL loans in US households:
- Financially fragile households, which is defined by low credit scores, past credit application rejections, or loan delinquency, tend to use BNPL much more frequently for relatively small purchases they may struggle to afford otherwise.
- Financially stable households, ie richer and more affluent, use BNPL less frequently.
- 89% of financially fragile users and have made multiple BNPL purchases in the past 12 months.
- 72% of financially stable users have used BNPL in the last 12 months.
- 60% of financially fragile BNPL users have used the product 5 or more times in the past year.
- Among financially fragile BNPL users, 18% have used BNPL 5 or more times in the past year.
- 23% of financially stable BNPL users have used the product 5 or more times in the past year.
- 62% of financially fragile users have an average purchase price under $250.
- 44% of financially stable users have made an average purchase price under $250.
- Financially stable users are more likely to have an average purchase price between $1,750 and $2,000.
- Even after controlling for income, financially fragile households make BNPL purchases that are, on average, about $220 smaller than financially stable households and make about 4 more BNPL purchases in the past year.
- Misunderstanding of BNPL’s impact on credit building is observed across both financially fragile and financially stable users.
- About 80% of US households did not use BNPL in the past year, indicating potential for increased adoption of the product.
The numbers are interesting when you dig into them and shows there is a big difference between how the Rich vs Poor are currently using BNPL loans and products. Financially Fragile means Poor and of course Financially Stable means Rich, to but it simply.
The most important take away; If you have more money, you are going to use BNPL less. If you have less money, you are going to use BNPL more.
A somewhat unsurprising summary of the data.
It would be nice if Liberty Street Economics actually defined what that meant in terms of income. Perhaps they didn’t have that data collected in the survey?
The last stat, that 80% of US households and consumers have yet to make a purchase using BNPL, line-ups with other data I’ve seen. Max Levchin, the CEO and founder of Affirm, stated in a podcast interview that 40 million Americans have used Affirm. That is a big number but… keep in mind that is actually only 12% of the US population.
All the above data is from people that have only actually bought products using a BNPL service.
Meaning Affirm, Klarna, Afterpay, and other consumer based BNPL companies have a lot of potential growth ahead of them. At least when you talk about the massive US consumer market.
Hopefully Liberty Street Economics and the New York Fed keeps releasing this type of data on the BNPL market. I will be happy to continue to share it.
What do you think of this data? Does it show that in this economy the economic divide keeps getting bigger?