The effects of buy now, pay later (BNPL) on customers’ online purchase behavior

Ashish Kumar, Jari Salo and Ram Bezawada

Journal of Retailing, 2024, vol. 100, issue 4, 602-617

Abstract: Recent innovations in financial technology (FinTech) have introduced short-term financing options for customer loans, allowing customers to make purchases and pay for them in future installments without incurring interest, a model commonly referred to as Buy Now, Pay Later (BNPL). Despite the increasing provision of BNPL by online retailers, there remains a limited understanding of its effects on customers’ online purchase behavior. To address this gap, we utilize a synthetic difference-in-differences research design to estimate the impact of customers’ BNPL adoption on their online purchase behavior, specifically measured by order size. Our empirical results indicate that customers who adopt BNPL provided by a focal retailer have a higher order size than those who use traditional payment services. Our empirical estimates indicate an increase of 6.42% in online spending by customers adopting BNPL. Additionally, we examine the moderating effects of various customer segments - including loyalty, category experience, and promotion sensitivity - as well as demographic factors such as age, income, household size, and product characteristics, particularly low-ticket items. The impact of BNPL adoption is found to be amplified among customers with high levels of category experience and promotion sensitivity. Conversely, the effect is attenuated among older and higher-income customers, indicating that younger and low-income customers are the primary drivers of this effect. Moreover, our analysis demonstrates that purchases of low-ticket items predominantly drive the observed effect. This study provides strategic insights for online retailers concerning the implementation and targeting of BNPL as an effective online payment option.

Keywords: FinTech; Buy now; pay later (BNPL); Traditional payments; E-commerce; Online purchase; Synthetic difference-in-differences (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022435924000654
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jouret:v:100:y:2024:i:4:p:602-617

DOI: 10.1016/j.jretai.2024.09.004

Access Statistics for this article

Journal of Retailing is currently edited by A. Roggeveen

More articles in Journal of Retailing from Elsevier
Bibliographic data for series maintained by Catherine Liu ().