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Impact of BNPL on Financial Well-Being

The document discusses factors that influence financial well-being and challenges posed by the rise of buy now pay later (BNPL) services. According to studies, BNPL can encourage impulse spending and lead consumers to spend more than intended by obscuring costs. This can negatively impact consumers' financial health by increasing debt loads. Research finds BNPL users tend to be less financially secure, with vulnerable households struggling more across financial measures like spending, saving, borrowing, and planning. While BNPL may benefit those who use it responsibly, it can also result in late fees and other financial problems for those who don't understand the terms or can't make payments.

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Lineses John Lloyd G.
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191 views2 pages

Impact of BNPL on Financial Well-Being

The document discusses factors that influence financial well-being and challenges posed by the rise of buy now pay later (BNPL) services. According to studies, BNPL can encourage impulse spending and lead consumers to spend more than intended by obscuring costs. This can negatively impact consumers' financial health by increasing debt loads. Research finds BNPL users tend to be less financially secure, with vulnerable households struggling more across financial measures like spending, saving, borrowing, and planning. While BNPL may benefit those who use it responsibly, it can also result in late fees and other financial problems for those who don't understand the terms or can't make payments.

Uploaded by

Lineses John Lloyd G.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

RRL

Financial Well Being

According to Consumer Financial Protection Bureau (2015). Consumers might


face financial well-being or a financial crisis. Due to the individualized nature of this
condition, income is not the only factor that influences it. Instead, financial stability and
freedom of choice in the present and future describe well-being. With purchasing
strategies, an individual can learn about their financial capabilities. To be financially
well, you need to be able to control your finances, sustain yourself in the event of
financial difficulty, strive to achieve your financial goals, and have the financial freedom
to make decisions that allow you to enjoy your life.

One of the challenges to financial well-being is the negative impact of the buy
now pay later trend (BNPL) leads to higher consumer debt on financial health, as
explained by McCarthy (2022). The LendingTree report identifies many possible
financial pressures that BNPL services might impose on clients, regardless of income
level. Almost 70% of all BNPL users acknowledged paying more than they would have if
they had to pay in full at the time of purchase. Consumers who use BNPL show that in
terms of purchasing what they need or want, it is more convenient for them to have it on
credit terms instead of paying a one-time payment on having the purchase. In support to
that is Pascarella (2022). BNPL encourages the citizens to buy things that they can not
simply afford. Most of the time, it is mpulsive, discretionary purchases that would not
have occurred otherwise.

In addition, it might complicate tracking payments if a consumer has various


transactions on multiple schedules with multiple firms. When a consumer's bank
account's funds are insufficient, both the consumer's bank and the BNPL provider may
impose fees. Because of the ease with which the loans obtained, consumers may wind
up spending more than they intended, that is according to the Consumer Finance
Protection Board (2022).

Supporting to the study is Gdalman & Greene (2022). BNPL users are less
financially secure than others. According to the FinHealth Score assessment system,
vulnerable households struggle to spend, save, borrow, and plan. Financially Vulnerable
families, as opposed to Financially Healthy households, suffer in practically every
aspect of their financial lives. Consumers who utilize a no-interest service and complete
their payments on time may be eligible for a no-cost financing option from BNPL.
However, for individuals who do not comprehend the conditions or can not make
payments, BNPL can result in additional financial problems such as late fees, interest
charges, or overdraft penalties, to mention a few.
Sources:
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financial-wellness/
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health/
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