BNPL customers twice as likely to miss a payment: survey

Increasing layoffs and rising balances could create a “perfect debt storm” for buy-now-pay-later (BNPL) customers, management consultancy cg42 says.

Consumers who use buy now, pay later (BNPL) for shopping are more likely to default. Still, most say they plan to continue using the financing option for larger purchases, a recent survey found.

Eighty-four percent of respondents said they used BNPL to pay for purchases they otherwise could not afford, according to a survey by management consulting firm cg42. Those users are also twice as likely to miss a debt payment, the study says.

BNPL customer behavior of particular importance in a more challenging economic environment, according to Hugh Tallents, partner and head of the financial services practice at cg42.

“With layoffs expected to increase in the New Year, many BNPL customers are spending right now in anticipation of receiving future salaries they may never receive,” Talents said. “When you combine that reality with the fact that BNPL customers have an average of 1.5 times more debt than non-customers and are more likely to have had an adverse financial event in the past, the New Year will bring a perfect debt storm.” .”

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Unemployment expected to rise in 2023: Fitch

The economy added 263,000 jobs in November, according to the latest report from the Bureau of Labor Statistics (BLS), and the unemployment rate was 3.7%, unchanged from October. This means that the number of unemployed in the country is still around 5.6 million.

However, Fitch Ratings’ unemployment forecast for 2023 paints a less optimistic picture. Demand for labor is expected to fall significantly next year “as Fed tightening weighs on economic activity,” Fitch said.

“The lagged impact of aggressive Fed tightening, the drag on real wages from high inflation and the knock-on effects of the downturn in Europe will push the US economy into recession territory next year – with the unemployment rate eventually rising to 4.7% in 2023 and peaking from 5.3% in 2024,” said Olu Sonola, Fitch’s head of US regional economics.

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Using BNPL for growth as traditional credit becomes increasingly difficult to obtain

A more challenging economic environment could make it harder for consumers to access credit as lenders become more risk-averse and apply stricter measures to reduce their credit risk, according to Tallents.

“Our research shows that BNPL is heavily used by people under the age of 35, and users are 40% less wealthy than non-users, meaning BNPL will only become a more attractive option as traditional credit becomes more difficult to obtain,” Talents said .

BNPL providers partner with retailers to allow customers to split the cost of their online purchases into multiple payment installments. That’s part of the appeal installment payments, which usually start within a few weeks of purchase, are interest-free. However, missed payments can result in late fees and other penalties.

BNPL Services is facing the challenge of increasing profitability and may start charging new user fees, Tallents said. That change could help “avoid customers who are most likely to miss a payment,” he said.

If you’re struggling with high-interest debt, you might consider paying it off with a lower-interest personal loan. You can visit Credible to compare loans from multiple lenders and find your personalized rate.

Have a financial question but don’t know who to ask? Email the Credible Money Expert at and your question can be answered by Credible in our Money Expert column.

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