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1 1 (October 26, 2021)

handle is hein.crs/goveerw0001 and id is 1 raw text is: ACongressional a Research Service Rapidly Growing Buy Now, Pay Later (BNPL) Financing: Market Developments and Policy Issues October 26, 2021 Buy now, pay later (BNPL) is a form of point-of-sales financing. It allows a consumer to purchase and take possession of an item immediately, then pay for it over a certain period of time or with a specified number of payments. BNPL financing is often offered online and has generally been developed by technology-focused, nonbank financial companies, often characterized as fintech companies. BNPL financing has been growing rapidly in recent years. Reports suggest that BNPL financing may have tripled in 2020 compared to the prior year. A consulting firm estimates that BNPL balances grew by 24% from 2016 to 2019 and are expected to grow around 20% annually for the next three years. This Insight discusses the BNPL financing market and potential policy issues in this market. Buy Now, Pay Later (BNPL) Financing Market BNPL financing allows consumers to spread the cost of a purchase over a set number of payments or period of time without accruing interest. For example, some BNPL financing services may require four installment payments (Pay in 4) in two-week intervals; other services may have regular intervals over a six-week period. BNPL financing aims to help consumers manage their personal cash flow, often at a lower cost and with greater flexibility relative to traditional financial products. BNPL financing may be attractive to thin credit file and younger consumers who may not qualify for traditional credit cards. Consumers may use BNPL financing through a merchant that embeds it as a payment option in the checkout process or directly on BNPL companies' platforms. BNPL companies determine consumer terms through a soft credit check and a consumer's past performance on the platform. While BNPL companies generally do not charge interest or fees at time of purchase, they charge a late fee if a customer does not make payment on time. BNPL companies generate most of their revenue by charging merchants for the service, who are willing to pay to attract new consumers to their merchandise. While some companies that offer BNPL financing operate independently, others work with banks to Congressional Research Service https://crsreports.congress.gov IN11784 CRS INSIGHT Prepared for Members and Committees of Congress

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