Buy Now, Pay Later: Survey Evidence of Consumer Adoption and Attitudes
Tom Akana — Federal Reserve Bank of Philadelphia, CFI Discussion Paper 22-02, 2022
Thesis
What do BNPL users themselves think is happening? The Philadelphia Fed's consumer survey says: mostly, that it's a convenience tool — not a credit product. Users pick "convenience" and "better money management" over "no other way to pay," skew young and lower-income, and report modest but real payment trouble concentrated among heavy users. The gap between "this helps me manage finances" (43.8% agree) and the fee schedule waiting on a missed installment is where this paper lives.
Method
- Survey of US consumers fielded through Competiscan's consumer panel (late 2021), cleaned and weighted; separates genuine pay-in-4/point-of-sale installment users from legacy store-financing users.
- Compares BNPL against credit cards, debit, P2P, and private-label credit on usage, adoption intent, reasons for use, and self-reported missed payments.
- Terms-and-conditions review of five large BNPL providers for what actually happens when a payment fails.
Key findings
- Users skew younger, lower-income (<$75k), non-White; credit-access reasons matter most for the young — 21% of under-36s cite inability to get approved for credit vs 3.3% of 56+.
- Top reasons for using BNPL: convenience 52.6%, purchase-size splitting 46.2%, "better manage finances" 43.8%. Credit access ranks low overall (19.1%) — but never leaves the top half for heavy users.
- Heavy users report difficulty paying at 14.7% (vs 15.3% of <$40k earners) — trouble concentrates exactly where usage intensity is highest.
- 4.0–4.6% of moderate/lower-income users failed to complete repayment schedules; a missed installment triggers $7–10 fees at Afterpay, Klarna, or Zip, with caps around 25% of the purchase — the "no fees" pitch survives only until the first slip.
- Adoption momentum is real: BNPL users say they'll use it again at high rates while only 2.5% of nonusers expect to start — the product grows by deepening current users, not converting new ones.
Limitations
- Self-reported: no transaction validation; recall and social-desirability bias run the direction that flatters the numbers.
- One panel provider, weighted survey — sample may miss the thinnest-file consumers entirely.
- 2021 snapshot: pre-dates later provider underwriting changes and credit-reporting pilots.
- Cross-sectional — can't separate "heavy users are financially stretched" from "financially stretched users go heavy."
So what for Nick
- The self-image gap is the actionable part: most users believe BNPL helps them manage money while the fee table says otherwise for the 1-in-20 who slip. "It helps me budget" is the sentence to be suspicious of — in yourself, not just in surveys.
- Missed-installment fees ($7–10, up to 25% of purchase) are the real interest rate hiding in "0% interest" — one slip on a $200 order can cost more than a credit card's monthly interest.
- If family asks about letting teens use pay-in-4: this paper's demographics say adoption deepens fast once started, and trouble clusters among the heaviest users. Treat it as a credit product with a marketing hat.