Growth of bnpl payments: risks for buyers and sellers in the context of e-commerce

Mykhailo Pyrkh
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Mykhailo Pyrkh: Zaporizhzhia National University

Economic Synergy, 2023, issue 4, 158-177

Abstract: The article outlines a trend in the active development of short-term consumer loans, also known as BNPL payments, BNPL stands for “buy now pay later". A BNPL is a form of short-term loan that allows customers to make purchases and pay them off later in a series of payments, usually four. The consumer's purchase is divided into multiple equal payments by BNPL, with the first payment made at the till. Short-term products from BNPL are often interest-free, but long-term products are not. Interest may be charged on BNPL products. Although BNPL was designed primarily for online sales, it has since been adapted to in-store transactions and has become an increasingly popular method of payment for electronics, apparel and fashion, furniture, and appliances. Today, BNPL is available for services like travel and even healthcare. Companies like Affirm, Klarna, AfterPay and Seazzle have seen rapid growth during the COVID-19 pandemic, and continue to show growth. Short-term consumer loans have been around for quite some time, but the BNPL phenomenon is unique. BNPL payments enables sellers to get more paying customers and buyers, on the other hand can get access to desired goods and services. However, this payment method also carries certain risks, which will be discussed in this article. Mastering the shifting world of BNPL payments demands an in-depth knowledge of the advantages and disadvantages. Consumers are drawn to BNPL because of its quick accessibility, which allows them to purchase things and services without paying any upfront fees. The ease of installment payments correlates to changing client desires, promoting financial adaptability. This ease, however, comes with a catch: late or missed payments can result in fines and have an influence on credit scores. It is critical that both customers and providers fully understand the ramifications of BNPL usage. As the industry grows, a thorough review of the regulatory framework and ethical lending practices becomes critical to ensuring a sustainable and equitable financial ecology. The ability to balance the benefits and hazards of BNPL is critical to its sustained success in altering modern consumer finance.

Keywords: information and communication technologies; e-commerce; risk minimization; chargeback; short-term consumer loans; fraud; buy-now-pay-later; BNPL (search for similar items in EconPapers)
JEL-codes: G23 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:bja:isteus:y:2023:i:4:p:158-177

DOI: 10.53920/ES-2023-4-11

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