Black Friday and Cyber Monday hit record highs in terms of sales figures, but there was alsoa record use of the buy now, pay later (BNPL) payment method.
BNPL has been gaining popularity over the past few years,especially among budget-conscious shopperswho want to avoid additional fees and interest associated with credit card purchases.
Key facts
●BNPL point-of-sale lending generated 42.5% more online spending on Cyber Monday this year than last year, or some $940 million, according to Adobe Analytics data.
●Overall, BNPL-driven spending in November, through Nov. 27, grew 17% year-over-year to $8.3 billion.
Why people use BNPL
Offered mostly by fintech companies,BNPL allows customers to pay back their purchases without interest, making it an attractive alternative to credit cards.The most common BNPL plan is four equal payments, which should allow customers to pay off their debt in six weeks. More players are getting in, with$Apple (AAPL.US)$introducing Apple Pay Later in March.
With living costs up and interest rates rising, BNPL can be the last option to tide consumers over after other financing choices are exhausted.
What is bad about BNPL?
BNPL may attract consumers who already have financial difficulties and are struggling to pay their existing bills and debt payments.
Americans with lower credit scores and those who have a harder time accessing loans are more likely to be pitched - and to use - BNPL payment plans, according to research from the Federal Reserve Bank of New York.
It may also encourage "excessive debt accumulation over time, affecting a consumer's ability to meet non-BNPL obligations" or users to overextend themselves, they said.
Investors might be warming again to the growth potential of alternative ways to pay despite potential risks.$Affirm Holdings (AFRM.US)$shares gained nearly 44% last week. That stock has more than tripled in 2023, boosting its market value to more than $8 billion on the growing popularity of BNPL services. Rival$Upstart (UPST.US)$rose 36 % last week; its shares have gained nearly 145% so far this year.
Source: WSJ, Bloomberg, The Street
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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