Recent innovations in financial technology (FinTech) have introduced short-term financing options for customer loans, allowing customers to make purchases and pay for them in future installments without incurring interest, a model commonly referred to as Buy Now, Pay Later (BNPL). Despite the increasing provision of BNPL by online retailers, there remains a limited understanding of its effects on customers’ online purchase behavior. To address this gap, we utilize a synthetic difference-in-differences research design to estimate the impact of customers’ BNPL adoption on their online purchase behavior, specifically measured by order size. Our empirical results indicate that customers who adopt BNPL provided by a focal retailer have a higher order size than those who use traditional payment services. Our empirical estimates indicate an increase of 6.42% in online spending by customers adopting BNPL. Additionally, we examine the moderating effects of various customer segments including loyalty, category experience, and promotion sensitivity as well as demographic factors such as age, income, household size, and product characteristics, particularly low-ticket items. The impact of BNPL adoption is found to be amplified among customers with high levels of category experience and promotion sensitivity. Conversely, the effect is attenuated among older and higher-income customers, indicating that younger and low-income customers are the primary drivers of this effect. Moreover, our analysis demonstrates that purchases of low-ticket items predominantly drive the observed effect. This study provides strategic insights for online retailers concerning the implementation and targeting of BNPL as an effective online payment option.
Keywords: FinTech, Buy now pay later (BNPL), Traditional payments, E-commerce, Online purchase, Synthetic difference-in-differences
- Authors: Ashish Kumar, Jari Salo, Ram Bezawada
- Journal: Journal of Retailing
- Year: 2024
- Volume: 100
- Issue: 4
- Pages: 602-617
- DOI: https://doi.org/10.1016/j.jretai.2024.09.004
Citations: 34 (Till: 2026-05-29) (using R package rcrossref)
Recent: Google Scholar
Conversation article: Research suggests those who use buy‑now‑pay‑later services end up spending more
Media appearances: ABC Radio with Sirine Demachkie, SkyNews with Cheng Lei, 6PR Radio in Perth with Russel Collett, 2SM’s breakfast program with Ron Wilson.
Media mentions: Conversation Article with more than 8500 views and picked by multiple media outlets (e.g., Nine News, InDaily, Evening Report NZ, The Mirage, Physc.org, Over Sixty