Survey: Many consumers misunderstand how buy now, pay later works
Survey: Many consumers misunderstand how buy now, pay later works

Buy now, pay later (BNPL) flexible installment payments are growing in popularity, but consumerstheir 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.

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