WASHINGTON — Amid growing concerns about economic instability and the risk of a wider economic downturn, the Progressive Policy Institute (PPI) has released a new report examining the rapidly expanding “‘Buy Now, Pay Later”’ (BNPL) trend. The report, titled “Buy Now, Pay Later: The New Face of Consumer Credit,” explores the benefits and risks of this emerging form of consumer credit and advocates for targeted regulations to protect consumers while encouraging ongoing innovation in the credit market.
Authored by Andrew Fung, an Economic Policy Analyst at PPI, the report highlights the growing popularity of BNPL services among young and low-income consumers, who are attracted to the flexibility these services provide in accessing goods and services that may otherwise be unaffordable. While BNPL loans can improve financial inclusion, they also carry significant risks, especially for consumers with limited financial literacy or those prone to overextending themselves financially.
“In today’s uncertain economic climate, it’s crucial to understand the patterns of consumer spending,” said Fung. “BNPL loans present a new way for consumers to access credit, but the rapid growth of this market requires careful attention to potential financial risks.”
The report outlines the current state of consumer credit, noting that while overall debt levels remain stable, there are emerging areas of concern that should be closely monitored. BNPL loans, with their smaller, fixed payment structures, are generally less risky than traditional credit cards. However, the report recommends sensible regulations, such as interest rate caps, clear loan term disclosures, and standardized dispute resolution processes, to protect consumers and support the sustainable growth of this credit option.
“As policymakers continue to navigate economic challenges, it’s important to examine the current state of consumer credit closely,” added Fung. “Our report provides a practical approach for ensuring BNPL can benefit consumers while mitigating potential risks to both individuals and the broader economy.”
The report also examines the demographic profile of BNPL users, revealing that these services are especially popular among Black, Hispanic, and female consumers, as well as those with household incomes between $20,000 and $50,000 per year. Although BNPL has grown rapidly, it still represents a relatively small portion of the overall American economy. However, its differences from traditional credit methods and the unique risks it presents are drawing increasing attention from policymakers.
Read and download the report here.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org. Find an expert at PPI and follow us on Twitter.
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Media Contact: Ian O’Keefe – iokeefe@ppionline.org
