Buy now, pay later (BNPL) flexible installment payments are growing in popularity, but consumers‘ their understanding may not increase at the same rate.
Thirty-one percent of American adults have used a BNPL service, aaccording to a new survey consumer sentiment and understanding around BNPL from the BNPL Zilch platform. However, the data demonstrates a general lack of understanding of how BNPL companies make money.
More than four in 10 respondents (43%) mistakenly believe that these companies make money from the interest they collect from consumers. And more than one in four (26%) think products sold through BNPL are tagged, with BNPL suppliers collecting the difference in cost, and a further 21% said BNPL companies make money from secret/unadvertised fees that are paid by the consumer. A total of 31% of respondents said they don’t know how BNPL companies make money.
When respondents were asked if they would use a credit card instead of BNPL, 48% said no because they like earning points and/or cash back with credit cards. Twenty-five percent said they did not trust or understand BNPL, and 20% said their credit card interest rate was lower than using BNPL.
When asked about reluctance to use BNPL, 25% said BNPL companies do not offer rewards or cashback points like credit cards. Sixteen percent said BNPL is unregulated and 13% said they simply did not understand how BNPL works.
Respondents also expressed a lack of loyalty to BNPL suppliers. Only 13% said they always use a specific vendor, and 19% of respondents said they used the option available on a retailer’s website when making a purchase.
Notably, confusion surrounding BNPL remains highest among older consumers. Forty-seven percent of respondents aged over 55 believe that BNPL may charge additional fees, while only 25% of consumers aged 18-34 share the same concern. In turn, only 11% of respondents over 55 would recommend using BNPL to friends and family, compared to 35% of respondents aged 18-34.
Despite possible consumer misunderstandings and apprehensions, analysis shows that BNPL is rapidly gaining popularity. According to Data According to eMarketer, more than 45 million US consumers (aged 14+) will use a BNPL platform in 2021, up 81.2% from the previous year.
Frustrations with credit card options
Although credit cards are still the primary tool consumers use to fund purchases, 50% of respondents said they believe consumers need options other than credit cards to make purchases and pay them in installments, and 54% said they thought credit card companies had too much of an impact. on credit scores.
Additionally, 40% of respondents said their credit card charged an interest rate higher than 12.99% and 26% did not know the interest rate they were being charged.
Among respondents who said they were unhappy with the credit card options currently available, 56% said interest rates are too high on all credit cards. Another 36% said they were unhappy with the annual fees charged by top credit cards.
Respondents also blame credit card companies for difficulty getting loans:
- Among consumers surveyed who had trouble getting loan approval, more than three in four (76%) blame credit cards.
- 26% were unable to get a loan because they defaulted on a credit card for a small amount (less than $2,000).
- 30% were unable to get a loan because they paid their credit card bill late (less than three times).
- 19% weren’t able to get a loan because the seller or retailer misbilled or misreported a transaction.