A new study shows that, as a result of the new buy now, pay later trend (BNPL), a large percentage of groceries are being purchased on installment plans—potentially causing large amounts of debt.
- BNPL services have become a popular option for making major purchases, including clothing, furniture, computers, gaming consoles, travel expenses, and outdoor events like sports games and concerts.
- A new study finds that 21% of BNPL services are for groceries, Loan Tree reports.
- The report found this statistic surprising, further noting that 27% of BNPL loans are used by users struggling with weekly expenses.
- Nearly half of Americans have used BNPL apps, Bloomberg reports.
- 32% of BNPL users, who earn more than $100,000 annually, use BNPL as a “bridge” while living paycheck to paycheck.
- The Consumer Financial Protection Bureau reports that the BNPL industry has grown into a $24.2 billion industry, as of 2021.
Why It’s Important
BNPL services can be very useful, particularly for large or extravagant purchases, but their popularity for common household items is a sign of the times. Inflation is running high at 4.98%, interest rates have slowed down the economy, and the labor market has begun to slow, with food prices suffering as a result of high prices and supply chain stressors.
Several companies like Pizza Hut and Zilp began offering BNPL pizzas last year, which was negatively received by critics as companies offering the chance to go into debt to finance a pizza delivery.
“High-interest rates are a double-edged sword. On the one hand, it will encourage more consumers to embrace BNPL over other forms of credit like credit cards because the interest-free rate periods of BNPL become more attractive in a high-rate environment. On the other hand, it puts a squeeze on BNPL providers raising money to lend from the debt market,” Carta Worldwide COO Richard Wray tells Fintech Global.
Several young women spoke with Bloomberg about their experiences and motives for using BNPL for groceries, and they share similar experiences. “I have to buy groceries anyway, and it feels awful to pay $250 at a time. Now I have more control over my finances, and it’s nice to know I have a little more in my account,” says 31-year-old Amber Kincade.
“I can’t just buy groceries out of pocket like I used to. It helps for a week or two, but then you’re stuck with a grocery bill for a couple of months,” says 34-year-old administrative assistant and single mother Faith Smith. “I’m worried. I’m living paycheck to paycheck even though I shouldn’t be,” she says. “Using these services is the only means of survival.”