The Effects of “Buy Now, Pay Later” towards Consumer Behavior in Specific Retail Sectors

by Ariel Marks

How BNPL affects consumer behavior in specific retail sectors_Ariel Marks.pdf

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Abstract:

“Buy Now, Pay Later” or BNPL, is a rapidly expanding phenomenon in the financial

world that is on the rise as of recently, and it is becoming extremely popular with consumers in the United States specifically. BNPL is a type of short-term financing that allows consumers to purchase goods and services immediately and gives the option to pay that back over multiple installments, often with no interest. BNPL has been a concept for decades, but in 2019, there was an explosive boom in the use of this financial service due to the COVID-19 pandemic. The pandemic led to an enormous increase in online shopping and financing in general due to a sudden drop in employment. The number of BNPL loans in the US grew rapidly from 16.8 million in 2019 to a whopping 180 million in 2021. The ability to manage money and repayment of loans in such small amounts with no interest became extremely attractive to consumers, especially in a time of economic disruption. Before 2019, BNPL was primarily used to finance very expensive things like furniture, instruments, farm equipment and other “minor” expensive purchases, this service allowed expensive items to be accessible to many by allowing smaller payments over time. This model is a predecessor, or modern precursor to today's version of BNPL, from being used for large purchases, to now small and often impulsive purchases. Companies like Afterpay and Affirm are huge leaders in this industry, targeting mostly younger consumers who are often more impulsive with purchases. The point of interest that I am researching in this paper is the effect of BNPL on consumer behavior in specific retail sectors, after the 2019 boom. There is very limited information on this financial service related to its boom and effects, especially since the situation is still constantly in development, which is why I

will be exploring this topic and will be doing extensive research to discover the full effect, short term, of consumer behavior pertaining to the use of BNPL. My sectors of interest will include apparel, food delivery and service based industries. Ultimately, this paper investigates how the rise of BNPL after 2019 has affected consumer behavior in specific sectors such as apparel, food delivery and service based industries. I hypothesize that the behavioral impact of BNPL will differ throughout each industry, but show a rapid growth in each sector as this credit service continues to rapidly grow.