BNPL, or buy now pay later, is a new payment option that is becoming increasingly popular with Gen Z shoppers. With BNPL, you can purchase items and then pay for them over time, usually in interest-free installments. This can be a great way to finance large purchases or spread the cost of items over time. However, it is important to note that BNPL companies typically do not report payments to credit agencies, meaning that missed payments could damage your credit score.
A recent report by eMarketer shows that Generation Z will drive adoption of Buy Now, Pay Later (BNPL) lending and predicts more regulatory scrutiny from the Consumer Financial Protection Bureau (CFPB) in the coming years. It is to no surprise that BNPL is popular among Generation Z—they are a generation that has grown up using digital payment products and banking and so are much more comfortable with “new” payments innovations such as BNPL.
According to Mercator Advisory Group research, we expect BNPL to surpass $100 billion in borrowing by 2024. Certainly, with all of this borrowing comes consumer responsibility to pay it back, which means varying levels of risk to the lenders. As more consumers start to use BNPL—a credit product that in many ways behaves just like an installment loan—we expect the fed to increase regulatory efforts. In fact, yesterday, the CFPB announced that it would be monitoring BNPL products and consumer usage of these products.
Overview by Ben Danner, Research Analyst at Mercator Advisory Group
