BNPL Is Broadening Its Audience To Include Financially Strong Borrowers, J.D. Power Finds

The audience for buy now, pay later loans is widening to include financially healthy consumers who don’t need the extended buying power BNPL loans provide. The reason, according to a report citing J.D. Power’s 2023 BNPL Satisfaction Study, released in August, is reasonable repayment terms.

While some 28% of U.S. consumers overall say they’ve taken out a BNPL loan at least once in the previous 90 days, 23% of financially healthy consumers surveyed say they use BNPL loans to finance purchases. By comparison, 32% of financially unhealthy consumers say they have used BNPL loans to finance a purchase in the past 90 days. In addition, 61% of financially healthy consumers say they’ve used BNPL more than once in the previous 90 days. “That figure was five percentage points higher than the percentage of at-risk consumers who had used [BNPL] more than once,” the report says.

A key reason financially healthy consumers use BNPL, according to the J.D. Power study, is that they consider the repayment terms to be reasonable. By comparison, just 6% of consumers overall cited reasonable repayment terms as the primary reason they make purchases using a credit card.

“Whether a consumer is financially healthy or not, the repayment terms of BNPL loans is something consumers like,” says Miles Tullo, managing director, banking and payments, for J.D. Power.

A big factor that makes the repayment terms of BNPL loans appealing to consumers, regardless of their financial health, is that consumers know they can pay off the purchase in a pre-determined number of installment payments.

“With BNPL, consumers know the terms and understand the loan will not become a revolving line of credit for which they don’t know what the monthly payment will be as they pay down the purchase,” Tullo says. “BNPL is an easier way to budget a purchase with lower risk of incurring long-term debt.”

Consumers also like paying with BNPL because it helps them budget to avoid overspending. Some 25% of consumers use BNPL because it is helpful for budgeting, compared to just 8% who say the same about credit cards, according to the J.D. Power report.

“[My BNPL plan] is easy to use. There are no complicated terms. It does exactly what it says it will. It’s split into four payments…and that’s that. No tricks, gimmicks, or little details lurking,” one respondent told JD Power.

For BNPL, financially healthy consumers had an overall satisfaction score of 704  on a 1,000-point scale, while at-risk consumers gave the lending-and-payments option a satisfaction score of 577, on average.

One common complaint from BNPL users is that they feel BNPL providers could do a better job of presenting the repayment terms of the loan. “When it comes to clarity about repayment terms, some BNPL brands scored higher than others,” Tullo says. “Overall, consumers want to see more clarity around BNPL terms, which makes it an area where BNPL providers can improve.”