Buy now pay later’s (BNPL) impact on the payments world continues to grow as research from TransUnion, the global information and insights firm, reveals that 50 per cent of Americans have used BNPL loans at least once, and 40 per cent of those who haven’t, are likely or very likely to use them in the future.
The research, conducted among 1,200 US consumers in the second quarter of 2024, explored the general usage and behaviour of consumers around BNPL loans. Buy now pay later is an instalment loan established at the point-of-sale for the purpose of financing a one-time, unsecured retail transaction. It allows consumers to finance a purchase with multiple, equal payments instead of one lump sum.
The study found that 85 per cent of BNPL users would recommend such loans to others, and of those who have used the payment method, 89 per cent have said they are satisfied or very satisfied. Interestingly, 53 per cent of non-users would be likely or very likely to use the service if it had a positive impact on credit scores.
However, not everyone is on board with these sorts of loans. TransUnion’s survey also revealed BNPL’s shortcomings with potential consumers. Approximately three in 10 consumers (28 per cent) who use BNPL cited being concerned about its impact on credit scores.
Today, the vast majority of BNPL loans are not reported to the CRAs.
TransUnion’s impact on the BNPL space
TransUnion launched new capabilities to accurately capture and reflect the unique features of BNPL loans in 2022. The methodology accounts for the high-frequency nature of such loans. The survey findings underscore the high usage patterns of BNPL loans with 80 per cent of users utilising BNPL more than once a year. This is very different from how current scores expect products like instalment loans to be used, so the changes were necessary.
“TransUnion is leading the effort with lenders to facilitate and accelerate BNPL credit reporting to create visibility to this growing segment of the financial services industry. Consumers deserve to have their BNPL credit included in their credit history, which could lead to more access to credit for a generation of consumers who have embraced BNPL as an alternative to traditional borrowing,” said Jason Laky, executive vice president and head of financial services at TransUnion.
“Our research indicates that the industry is attracting a large base of consumers who say that the ability to easily track payments and balances attracts them to these products – once they are able to see their BNPL loans in their credit file, that will be even easier.”
Liz Pagel, senior vice president and head of consumer lending at TransUnion
“The new reporting methodology will allow models to give consumers credit for making on-time payments on their BNPL loans without penalizing them for using them more frequently than typical instalment products,” said Liz Pagel, senior vice president and head of consumer lending at TransUnion. “Today, three in four BNPL users believe that using the payment method will impact their credit scores positively.”
The general consensus
As more and more consumers across different age ranges and credit scores use BNPL products responsibly, the loans’ inclusion on the credit file will bring in more consumers who are currently either left out of the system entirely or who are struggling to rebuild credit.
Looking at both users and non-users of these products, the sentiment around credit bureau reporting was positive:
Over half of BNPL users across high-, medium-, and low-income tiers ranked the ability to add payment history to build credit scores as an important or very important feature (low income – 56 per cent, medium – 61 per cent, high – 64 per cent)
Eighty-six per cent of BNPL users would be very likely or likely to use these lending products if they could positively impact credit scores.
Fifty-three per cent of non-users said that they would be likely or very likely to use BNPL products if they could have a positive impact on credit scores.
“One of the key takeaways from the research is that BNPL is here to stay. Consumers find value in the product and they overwhelmingly like the experience of using it. While the financial services industry is clamouring for visibility into the payment method’s data, consumers see the benefits of credit reporting as well. This growing industry could become a force for financial inclusion as the data begins to enter the credit reporting ecosystem,” concluded Pagel.
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