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Data Brief: 77 Pct Of Credit-Challenged Consumers Favor BNPL For Spend Management

Opening on the fundamental idea that most shoppers crave digital tools “that are secure and provide tangible value, such as expanding their payment options or stretching their budgets,” PYMNTS’ July 2021 Buy Now, Pay Later: The Financial Self-Care Revolution Report, a collaboration with Sezzle, a census-balanced survey of more than 7,000 consumers, offers profound insights into the evolution of buy now pay later (BNPL), “an increasingly popular alternative for consumers with less-developed credit histories as well as those seeking affordable alternatives to exorbitant credit card fees.”

This excerpt of that study is concerned with drivers behind mounting perceptions of BNPL as a budgeting tool and a gateway for accessing better financial health — and higher credit scores.

Noting that “BNPL provides a rapid pathway to retail shopping for larger purchases and helps rescue blemished credit histories,” the study adds that “BNPL’s ability to spread payments over time and its ease of use were the most cited reasons for choosing the method, regardless of the consumers’ level of financial inclusion.”

Consumers with blemished credit or challenging credit histories see BNPL to improve overall credit health and scores specifically, a fact that is amply supported by the findings.

According to the Buy Now, Pay Later: The Financial Self-Care Revolution Report, over half (51 percent) of consumers who have used or would use installments think BNPL “will allow them to improve their credit scores. This rate is higher for financially underserved consumers (57 percent and 69 percent of second-chance and shut-out consumers, respectively).”

Additionally, 77 percent of consumers with little credit or damaged credit now see BNPL “as an option that improves their ability to buy things that they want without overspending.”

Among the three BNPL personas identified in the new research — the financially stable “worry-free,” nearly one-quarter (23 percent) of “second-chance” consumers with blemished credit, and “shut-out” consumers typically living paycheck to paycheck and struggling with bills — BNPL is seen as an alternative to credit cards they either can’t access or can’t afford.

“Many consumers cite a fear of overspending, the Buy Now, Pay Later: The Financial Self-Care Revolution Report. Card fees and interest rates are top reasons people in all personas avoid traditional credit cards. “PYMNTS’ research found that 40 percent of worry-free consumers who did not have a credit card in the last 12 months reported that they did not want to use credit cards because the cards encouraged them to spend money,” per the study.

“Nearly the same share of second-chance consumers, 42 percent, stated the same. Among those without credit cards, 35 percent of worry-free consumers and 37 percent of second-chance consumers stated that they did not want cards because interest rates were too high. Twenty-five percent of worry-free consumers without credit cards stated that credit card fees were too high for them to apply for one,” as with 28 percent of second-chance consumers.

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