Buy Now, Pay Later: Assessing the Financial and Behavioral Implications for Gen-Z Consumers in the USA

Abstract: Background: The payment methods available to consumers for online purchases have evolved over time, with options ranging from debit and credit cards to e-wallets like PayPal and Apple Pay. Among these methods, Buy Now Pay Later (BNPL) has emerged as a significant payment method alternative. At the same time the global debt had a record jump between 2021 and 2022, with low-income households being the ones that suffer the most. The convenience offered by BNPL payment method, coupled with the accelerated uptake of this method in recent years, has created regulatory scrutiny concerning its contribution to the financial health of the society.   Purpose: The purpose of this study is to explore the relation between BNPL and financial wellbeing. The Generation Z cohort in the USA was specifically chosen as the target demographic due to their pronounced online purchasing behaviors and the notable tripling of their overall debt within the 2021-2022 period. Methodology: A quantitative approach for collecting data and data analysis was conducted using an online survey. The survey’s questions are influenced by previous research on financial wellbeing and debt levels. The survey’s populations are consisting of 150 individuals from different demographic backgrounds. The survey’s results have been analyzed by writing Python scripts and use relevant statistic libraries. Results and analysis: A significant portion of the study's respondents, irrespective of various demographic factors such as gender, education, and income level, answered that their use of BNPL had little to no impact on their financial wellbeing. Of particular significance is the answers of those familiar with BNPL who did not attribute any deterioration in their financial health by using BNPL. A subset of respondents acknowledged the potential for BNPL to cause overspending or regrettable purchases, but these sentiments were not predominant. Such findings challenge the common belief that BNPL inherently distributes to financial imprudence. However, nuances emerge when examining specific demographics. For instance, male respondents and those with lower educational attainment displayed a slightly heightened propensity to link BNPL with overspending. Conclusions: The overarching narrative suggests that while BNPL might influence purchasing behaviors to some extent, its direct impact on the broader financial wellbeing of individuals is not conclusively negative. Recommendations for future research: Future research can examine deeper behavioral insights on the effects of BNLP, investigate its effects on specific industries (e.g. luxury fashion) or examine global trends (given the present study is focused on USA).