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Understanding Consumer Demand for “Buy Now, Pay Later”

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Abstract

Consumer demand for “Buy Now, Pay Later” (BNPL) has surged, but the specific attributes consumers value remain unclear. We conduct a novel probabilistic stated choice experiment varying BNPL attributes across hypothetical scenarios to estimate consumers’ underlying preferences and their willingness to pay (WTP) for each feature. Consumers have a negative WTP for the standard bundle, on average, but younger and lower income consumers have stronger demand. Simulating consumer demand with estimated preference parameters reveals that most shifts away from the standard BNPL bundle reduce demand and create a more negatively selected pool of BNPL users, especially when interest is charged.

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  • Felix Aidala & Gizem Koşar & Daniel Mangrum & Wilbert Van der Klaauw, 2025. "Understanding Consumer Demand for “Buy Now, Pay Later”," Staff Reports 1167, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:101928
    DOI: 10.59576/sr.1167
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    JEL classification:

    • 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
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • R22 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other Demand

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