The use and disuse of FinTech credit: When buy-now-pay-later meets credit reporting

Yanfei Dong, Jiayin Hu, Yiping Huang, Han Qiu and Yingguang Zhang

No 1239, BIS Working Papers from Bank for International Settlements

Abstract: How does information sharing affect consumers' usage of FinTech credit? Using a unique dataset of "Buy Now, Pay Later (BNPL)" users from a large digital platform and exploiting a credit reporting policy change, we document that consumers significantly reduce BNPL usage when the BNPL lender becomes subject to credit reporting regulation. This reduction is particularly pronounced among borrowers with default histories, who also show improved repayment behaviors compared to those without such records. The decrease in BNPL usage also leads to a reduction in online consumption, supporting the financial constraint hypothesis. Our findings indicate that information sharing can help mitigate overborrowing and overspending, with stronger effects seen among younger borrowers, those who previously spent more, or those with credit cards. We also highlight the synergies between BNPL lending and Big Tech platforms' ecosystems, which imperfectly substitute for formal enforcement institutions.

Keywords: fintech; BNPL; consumer credit; information sharing; credit reporting; overborrowing; big tech platforms (search for similar items in EconPapers)
JEL-codes: G21 G28 G51 G53 (search for similar items in EconPapers)
Date: 2025-01
New Economics Papers: this item is included in nep-pay
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