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Buy Now, Spend More, Pay Later: Behavioural Mechanisms of Buy Now Pay Later Products

Author

Listed:
  • Jose, Anu

    (Central Bank of Ireland)

  • Kelly, Jane

    (Central Bank of Ireland)

  • King, Michael

    (Trinity College Dublin)

  • McCarthy, Yvonne

    (Trinity College Dublin)

Abstract

We study the behavioural effects of Buy Now, Pay Later (BNPL), a rapidly expanding form of consumer credit. Through an experiment conducted with a nationally representative sample in Ireland, we find that participants spend, on average, 4.39% more when using BNPL for purchases compared to debit cards. We demonstrate mental accounting effects where an inflated perception of available funds due to prior BNPL usage leads to a 22.2% higher likelihood of spending on a discretionary product. In parallel, we show the importance of anticipatory effects of such a credit innovation, whereby the mere expectation of future access to BNPL increases current debit card spending by 3.1%. While salient risk disclosures improve understanding of BNPL risks, they do not significantly affect usage or spending patterns. These findings highlight the dual psychological impact of BNPL on spending, support the rationale for consumer protection efforts, and establish the relevance of BNPL as a financial product of interest to macroeconomic policymakers.

Suggested Citation

  • Jose, Anu & Kelly, Jane & King, Michael & McCarthy, Yvonne, 2025. "Buy Now, Spend More, Pay Later: Behavioural Mechanisms of Buy Now Pay Later Products," Research Technical Papers 15/RT/25, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:15/rt/25
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    File URL: https://www.centralbank.ie/docs/default-source/publications/research-technical-papers/rtp-15-2025-behavioural-mechanisms-of-bnpl.pdf?sfvrsn=9b816e1a_8
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    JEL classification:

    • G4 - Financial Economics - - Behavioral Finance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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