The number of consumers using Buy Now, Pay Later services is on the rise, which means that more consumers are starting to miss their payments, according to the results of a survey that were released this month. The survey reveals just how popular BNPL products have become with consumers who are shopping online and just how dangerous those products can be, from a financial standpoint.
More than one-third of consumers with one BNPL account have missed or made a late payment, and nearly half of those with multiple BNPL accounts have done so, according to the survey, which was released by Breeze, a company that offers long-term disability insurance.
Nearly three-quarters of those who were surveyed have used a BNPL product, compared with just 60% who had done so last summer. And, 62% of consumers expect that BNPL usage will continue to increase in 2022.
BNPL is a form of credit that is different from credit cards. Consumers can use a BNPL product to make specific purchases on specific items, whereas a credit card can be used for a broad range of products. BNPL products are typically paid back in a few, scheduled installment payments, where consumers can choose how much of their credit card bill they wish to pay every month. And when a credit card bill is paid, those funds become available to use again.
Credit bureaus are beginning to look at incorporating BNPL payment histories into their scoring models, and the Consumer Financial Protection Bureau has opened an inquiry into the product to determine if additional regulation or supervision is needed.
One of the problems that consumers face with BNPL is the ease with which it can be used. Without a standard credit check, consumers can find themselves in financial trouble, fast. In fact, 57% of those who participated in the survey said that BNPL has led them to spending beyond their means. Among those with multiple accounts, that figure jumps to 69%. Nearly half of those surveyed said they use BNPL because they do not qualify for traditional credit cards.