The Effects of BNPL on Customers’ Online Purchase Behavior

Research Motivation

• Buy Now, Pay Later (BNPL) is expanding rapidly in e-commerce
• Retailers increasingly embed BNPL at checkout
• Evidence on actual customer-level purchase effects remains limited

Conceptual Logic

• BNPL shifts payment pain into the future via installments
• This can increase perceived affordability at the point of purchase
• Behavioral mechanisms:
  • Present bias / hyperbolic discounting
  • Mental accounting
  • Lower transaction friction in checkout

Expectation: BNPL adoption increases online order size.

Data and Research Setting

• Online retailer in the Nordic region (outdoor category)
• Observation window: Jun 2012 to Nov 2014
• Final sample:
  • 42,882 customers
  • 63,672 online orders
• Payment options: card, pay-on-delivery, BNPL

Empirical Strategy

• Quasi-experimental design with staggered BNPL adoption
• Main estimator: Synthetic Difference-in-Differences (Synthetic DiD)
• Why this approach:
  • Handles heterogeneous timing of treatment
  • Relaxes strict parallel-trend dependence
  • Improves causal identification under observational data constraints

Main Effect

• Equivalent average gain: €3.79 per week per adopting customer
• Directionally consistent in robustness checks:
  • TWFE ATT: 0.0895***
  • Staggered DiD ATT: 0.0958***

Who Drives the Effect?

Moderating effects after BNPL adoption

• Low-ticket items: +19.30% (strongest)
• Promotion sensitivity: +6.80%
• Category experience: +5.99%
• Loyalty: -0.96% (weaker among highly loyal customers)
• Age: negative interaction (stronger for younger customers)
• Income: negative interaction (stronger for lower-income customers)
• Household size: not significant

Managerial Implications

• BNPL can be an effective conversion and basket-size lever
• Strongest commercial upside appears in:
  • low-ticket product contexts
  • younger and lower-income segments
  • promotion-sensitive and high-category-experience customers
• BNPL should be treated as a targeted strategy, not only a payment add-on

Limitations and Future Research

• No data on repayment behavior, late fees, or installment delinquency
• No direct measure of customers’ financial literacy
• Focus is customer-retailer relationship, not full three-sided BNPL ecosystem
• Future work:
  • long-run financial well-being effects
  • regulatory changes and behavioral response
  • broader category and market replication

Citation

Kumar, A., Salo, J., & Bezawada, R. (2024). The effects of buy now, pay later (BNPL) on customers’ online purchase behavior. Journal of Retailing. https://doi.org/10.1016/j.jretai.2024.09.004