Increasing Late Fees, More Defaults as Buy Now, Pay Later Expands Reach

Convenient product carries risks for consumers

Photo by Franki Chamaki on Unsplash

Buy Now, Pay Later — once the convenient way to “pay in four” for beauty and apparel — has expanded its reach into nearly every sector. This includes groceries.

Warm and Fuzzy Grocery Debt?

Jason Mikula of Fintech Business Weekly breaks down a recently released report from the Consumer Financial Protection Bureau (CFPB) that details the impact of BNPL products on the market and on consumers.

Here are some key takeaways:

1. The total dollar amount of loans originated increased 11x from 2019 to 2021. That’s big growth for a relatively new industry and signals BNPL’s popularity with consumers.
2. The average loan size is relatively small — currently sitting at $135. In a typical “pay in four” arrangement, then, the customer would purchase the product with $33.75 up front and three additional payments (usually two weeks apart). So, over six weeks, a customer would fully pay for their purchase.