Buy now pay later: Impact of installment payments on customer purchases

Buy now pay later: Impact of installment payments on customer purchases

with Dionysius Ang

Abstract:

Buy Now Pay Later (BNPL) installment payments allow customers to pay for discretionary purchases in a series of interest-free installments over a short period of time. This research provides novel empirical evidence on how customer adoption of BNPL installment payments impacts spending. The authors leverage customer-level transaction data before and after introducing a BNPL installment payment service at a large US retailer. A difference-in-difference analysis reveals that BNPL installment payments impact spending in two key ways: (1) adopters are more likely to make a purchase from the retailer compared to non-adopters, and (2) adopters spend more compared to non-adopters. These effects remain statistically and economically significant over time. We further uncover heterogeneity across time and customers by showing that the positive effect of BNPL adoption on purchase amount is stronger in the short term, and also stronger for lighter spenders than heavier spenders. Three experiments reveal an underlying mechanism – perceived financial constraints. We show that BNPL installment (vs. lump sum) payments lower perceived financial constraints, increasing spending.

More information on Stijn Maesen can be found here.

The Seminar will be held in Seminar Room RuW 1.201 as well as broadcasted via Zoom with the following link:

https://uni-frankfurt.zoom.us/j/62958556058?pwd=b01qWXlrbVMzc1JFVEhjSWNvdGZPQT09

Meeting-ID: 629 5855 6058
Kenncode: 101686