While “buy now, pay later”, a third of US users are behind on payments

September 9 (Reuters) – One-third of U.S. consumers who used “buy now, pay later” services fell behind on one or more payments, and 72% said their credit scores had gone down , according to a new study released by personal finance company Credit. Karma showed.

The study, conducted by software company Qualtrics, surveyed 1,044 adult consumers in the United States last month to gauge their interest in buying now pay later (BNPL) and found that 44% had used those services before.

The usage figure was up slightly from a similar survey conducted by Credit Karma for Reuters in December, while missed payments were down from 38%.

The latest survey found that younger consumers were more likely to miss payments. More than half of Gen Z or Millennials – those born between the early 1980s and mid to late 1990s – reported missing at least one payment. This compares to 22% of Generation X, born in the early 1960s to early 1980s, and 10% of baby boomers, those born between the mid 1940s and 1980s.

There has been an increase in the use of BNPL services, which allow consumers to easily split payments for purchases into multiple installments. The boom in volumes from vendors such as Klarna, Affirm Holdings (AFRM.O), AfterPay Ltd (APT.AX) and PayPal Holdings Inc (PYPL.O), was in part due to the growth in online shopping during the coronavirus pandemic.

The explosive growth has led to more transactions and competition. Earlier this week, PayPal announced it would acquire Japanese buy now, later pay company Paidy, while rival Square Inc (SQ.N) agreed last month to acquire AfterPay. Read more

The growth has also led to closer scrutiny from regulators who aim to ensure consumers don’t go into debt more than they can afford.

“It’s easier than ever to buy an item – and finance it – without even thinking about the implications of the purchase,” said Colleen McCreary, financial attorney at Credit Karma. “It’s this disconnect between making a purchase and actually paying for it where consumers can get into trouble.”

Most consumers who used BNPL’s services said the average purchase was $ 500 or less. Low-cost purchases were most common among Gen Z, nearly half of whom used BNPL’s services to pay for expenses of $ 100 or less, according to the survey.

Reporting by Anna Irrera. Editing by Jane Merriman

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