The Economics of “Buy Now, Pay Later”: A Merchant’s Perspective

Tobias Berg, Valentin Burg, Jan Keil and Manju Puri

No 33152, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: “Buy Now, Pay Later” (BNPL) is a key innovation in consumer payments. It bundles the sale of a product with a subsidized loan, effectively offering lower prices to low-creditworthiness customers. BNPL thereby allows merchants to price-discriminate among customers with different willingness-to-pay. Consistent with a price-discrimination mechanism, we show that BNPL increases sales by 20%, driven by low-creditworthiness customers and products where market power is larger. We find that the benefits of offering BNPL significantly outweigh the costs for the merchant. Our findings help to explain the surge in popularity of BNPL in e-commerce around the world.

JEL-codes: D12 G40 G59 (search for similar items in EconPapers)
Date: 2024-11
New Economics Papers: this item is included in nep-com and nep-pay
Note: CF
References: Add references at CitEc
Citations:

Published as Tobias Berg & Valentin Burg & Jan Keil & Manju Puri, 2025. "The economics of “Buy Now, Pay Later”: A merchant’s perspective," Journal of Financial Economics, vol 171.

Downloads: (external link)
http://www.nber.org/papers/w33152.pdf (application/pdf)

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:nbr:nberwo:33152

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w33152

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().