What: New research from Imperial College Business School reveals that buy-now-pay-later options increase consumer spending by 10% and boost purchase likelihood by nine percentage points, while raising concerns about financial vulnerability.

Why it is important: This research provides concrete evidence of BNPL's dual impact on retail: driving sales growth while potentially contributing to unsustainable consumer debt, highlighting the need for balanced regulation.

Imperial College Business School's analysis of a major US retailer's BNPL implementation reveals significant impacts on consumer behavior. The study, comparing sales before and after BNPL introduction, shows a sustained 10% increase in spending amounts and a nine percentage point rise in purchase probability. Credit card users showed particular receptivity to BNPL options, suggesting a preference for flexible payment solutions.

However, the research also identified concerning trends, with financially vulnerable consumers more likely to increase spending using these schemes. With BNPL users reaching 380 million globally in 2024, regulators are preparing new rules, particularly in the UK, to address potential risks. The study's authors emphasize the need for protective measures to prevent vulnerable customers from taking on unsustainable debt levels.

IADS Notes: The research findings align with broader industry trends observed in 2024. Problem borrowing in BNPL is growing at twice the industry's rate, while traditional credit options face new regulations. The expansion of BNPL services into physical retail suggests a fundamental shift in consumer financing patterns, emphasizing the need for balanced oversight of these evolving payment solutions.

BNPL really does make shoppers spend more