Claire Tassin, an e-commerce analyst at the Morning Consult, joined Cheddar News to discuss BNPL plans.

Claire Tassin, an e-commerce analyst at the Morning Consult, joined Cheddar News to discuss whether or not utilizing buy now pay later plans will hurt or help American consumers this holiday season.

The Pros and Cons of Buy Now Pay Later

joining us now to discuss is claire tasks in retail and e commerce analyst at morning Consulate Claire thanks so much for joining us this morning. Can you break down the pros and cons of Buy now pay leader for the U. S. Economy. Absolutely. So the easiest way to think about buying Buy now pay later is it's just another credit tool that now consumers and retailers have in their pocket to figure out how they're going to pay for purchases much like credit cards. They can be used really effectively by consumers to stretch your cash flow and hopefully avoid interest if you're paying that off every month. But just like credit cards it's very easy with Buy now Pay leaders integrations into pretty much every e commerce site now to be able to rack up more of those payments than a person might be able to afford every month. You mentioned you know increasing debt potentially maybe more fees even you know the economy is uncertain right now. We're seeing layoffs accelerate should people really be using this option in the holiday season? So we did see a massive spike of people using Buy Now pay later in the 2021 holiday season. We saw a huge spike of people using it for black friday in our own data morning console. We see that financially anxious people are the ones who are really taking advantage of Buy Now pay later loans to afford their holiday spending. There's a 20 point gap between those who are financially saying that they're more likely to take on additional debt via Buy now pay later in order to afford their holiday spending. So if that means you're just finding a little bit of extra cushion in your budget to spread out those payments with no interest over a few months, that's fine. But again I'm worried about the fact that these the financially anxious folks are the ones who might be running into some trouble when those ones start coming to next year. Claire you mentioned some of these statistics here of the increase in using this as an option. And one of those that we saw is revenue of buy now pay later rising about 72% week over week in the period of Black Friday. Why has this option become so popular in the first place? You mentioned the types of people that it's popular with but why is this more popular among say all all consumers sure. It's particularly popular among younger people, those with slightly lower household incomes. And it's because it feels like a lower risk way to take on more consumer set. It's often zero interest, which is great compared to credit cards and you're signing up for a loan to pay back over a defined period of time. It could be as little as four payments if it's a larger purchase, it can stretch a little bit longer. But it feels like something that's more controlled that you're not gonna um You know, get out, get stretch your budget too far just by it saying, you know, it's easy to take a little bit more and a little bit more through these loans by spreading out those payments over a few months rather than taking that all at once. But again, the problem is that people tend to take out more of these loans and they can pay back now buy now pay later spending is projected to hit $1 trillion 2025. Do you expect this trend to hold of the long term? I really do. We're seeing those increased utilization of buy now pay later again, especially among those who are financially anxious. As you mentioned, there's a lot of indicators in the economy that people will continue to be financially anxious looking into next year. The one catch is that we do know that the Consumer Financial Protection Bureau is taking a look at these and putting increased increased scrutiny because of the increased risk for consumers from buy now pay later loans. So given all of the kind of risks that we've mentioned so far in discussing this issue when consumers are turning to buy now pay later. What types of things should they keep in mind just being very aware of how that monthly payment or whatever payment frequency or signing you're signing up for is going to impact your budget. Making sure that if you have other unexpected expenses, let's say, you know, a car repair that you can't really afford to put off, that you'll be, you'll still have some cushion in your budget to afford that in addition to the buy now pay later lens and of course we have a few prominent players in this space right now, but is this becoming a more crowded space? Are we seeing, you know, others kind of disrupt the area that we've seen, you know, a firm or close to kind of take over at up to this point. Sure. So the big news last week was walmart's financial arm of their business is getting into the buy now pay later games. So we're seeing this not just come from these providers, we're seeing retailers themselves get into the waters as well as more traditional banks are starting to offer buy now pay later to their credit customers. So it's certainly becoming much more common and prevalent and feels like just another option just like credit cards and finally here, you know, with all the potential pitfalls for consumers, are we gonna see any regulators step in? Is there going to be more education for consumers on what this type of option actually means for them? How is that going to move forward as we head into the future with this? I hope so. You know, we know that the C. F. P. B. Is taking a look at buy now, Pay later. They have called attention that they are scrutinizing this market just again because it's very easy. It's very fast to take out these loans when you're just in that shopping cart buying something online. And we know people are using this for a lot of day to day and smaller purchases, which um, should bring a few alarm bells. We want to make sure that the correct protections are in place for shoppers. Yeah, Claire certainly might feel good sort of spreading that debt out in the moment. But when down the line, you're still paying for your christmas gifts many months later might be a different story. That's Claire task in retail. And e commerce analyst at the morning consult. Thanks so much for joining us this morning.