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The Psychology Behind Buy Now Pay Later

Updated: Dec 20, 2022



Why Consumers Think BNPL is NOT a ‘Debt’ and Why That Matters!


Is the instant gratification really worth it?



Ever wonder why you're drawn to the "buy now, pay later" option when you're shopping online? It turns out that there's some really interesting psychology behind why consumers are drawn to BNPL schemes, and why they often don't see them as a form of debt and as Financial Advisers we are always interested in understanding why people think and behave the way they do – especially when it involves money! The bottom line is that BNPL schemes are designed to appeal to our emotions, rather than our logic. And that's why they can potentially be so dangerous.

Firstly, BNPL schemes tap into our desire for instant gratification. We live in a world where we expect to get what we want, when we want it. BNPL schemes allow us to have what we want now, and pay for it later. This is especially appealing to younger consumers who haven't yet learned the value of delayed gratification. Secondly, BNPL schemes play on our FOMO (fear of missing out). If everyone else is using these schemes to buy the latest must-have items, then we don't want to be left behind. The pressure to keep up with our peers can be strong, and BNPL schemes make it easy to do just that. Thirdly, and perhaps most importantly, BNPL schemes exploit our cognitive biases. We humans are notoriously bad at making rational decisions when it comes to money. BNPL schemes take advantage of this by making it easy to spend money that we may not have, and may not be able to afford.


Don't Be Played a Financial Fool It's no secret that people love a good deal. Whether we're talking about clothes, food, or even experiences, we're always on the lookout for ways to save money and get more for our hard-earned cash. So, it's no surprise that the "buy now, pay later" model has become so popular in recent years with Millennials and Gen-Zers. If you are prone to making impulse purchases these offers can be especially tempting.

People who aren't eligible for credit cards or loans will often qualify for BNPL programs because there's no formal credit check this unfortunately can place two groups at risk of making purchases they won’t be able to pay back:

People with no credit, such as teens and young adults.

They may lack the financial literacy to know their budget and cash flow and whether they will be able to make payments when they are due. They may not understand the fees for usage or fines for late payments.

Those with poor credit. This may include people who have overextended their credit.

People with addiction issues, such as drug or alcohol problems, gambling, or compulsive spending may also be susceptible. BNPL perpetuates and exacerbates financial problems as well as addictive and compulsive behaviours. Beware of the ‘Buy Now, Pay Later’ Psychological Pitfall

‘Buy Now, Pay Later’ schemes will always appeal to our impulsive nature. It’s very easy to make an impulse purchase when you don’t have to pay for it immediately. This can be especially true if you’re using credit or store cards which offer interest-free periods.


To prevent falling into the temptation of BNPL, consider the following:

  • BNPL makes it easier to overspend. Psychologically, the four payments make the hefty price tag sound better by presenting them in seemingly manageable bites. If you do this regularly, it's easy to lose track of when your payments are due.

  • Fees can add up. Just like credit cards if you miss payments, you may be charged a late fee.

  • BNPL can be hard to manage. If you sign up for more than one service, it can be hard to keep track of payments as most are due every two weeks, not monthly like credit cards

  • BNPL may affect a loan application. Lenders consider BNPL spending when applying for a car loan or home mortgage.

Healthier alternatives to BNPL include only buying what one can pay for in cash, paying off credit cards in full and seeking professional help. So ask yourself, is the instant gratification really worth it?


If this article prompted you to consider your finances, why not speak to an adviser - click the button below to book a time to chat all things finance!


Don’t forget to come back for article number 3 where we delve further into Buy Now Pay

Later and if it Should be as regulated as other financial products!


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