The invisible impact of “buy now, pay later” holiday shopping on African Americans

The festive season is characterized by joy, laughter and, unfortunately for some, the financial burden of buying gifts. Adobe Analytics reported a 43% year-over-year increase in buy now, pay later (BNPL) purchases on Cyber ​​Monday. This increase in his BNPL usage was driven by consumers buying in bulk, with the number of items per order also increasing by 11%. However, there is growing reliance on these BNPL services, especially within the African American community, raising concerns about the potential economic impact.

Breakdown you need to know:

As consumers continue their holiday shopping, they don’t necessarily realize that BNPL, a new take on the layaway concept, is a type of credit or loan. CultureBanx reported that data suggests that while BNPL services are used by all demographics, they are disproportionately used among economically vulnerable individuals. According to a study published by the New York Federal Reserve, many BNPL users are economically vulnerable.

The African American community in particular appears to be disproportionately affected by BNPL. According to the Consumer Financial Protection Bureau (CFPB), Approximately 63% of black consumers more likely to use BNPL platforms than white consumers. This statistic is alarming considering the potential financial risks associated with these services. Although BNPL attracts a wide range of users, including those with high incomes and high levels of education, users with low credit scores and unmet credit needs make up a large share of all BNPL users.

Balancing BNPL debt:

Among different racial groups, black and Hispanic consumers are more likely to use BNPL services than white consumers.with BNPL market expected to reach $3.98 trillion According to Allied Research, by 2030, the problem is here. Many consumers don’t fully understand this new form of debt financing, leaving them vulnerable to bad financial situations.

the current, 27% of black households are late on their debt payments.. Lending Club Holiday Season Report We found that 37% of Americans plan to use financing such as a personal loan or credit card to buy now, pay later this holiday season, up from 34% in 2021. did. Americans spent $20.8 billion through these BNPL servicesaccording to Accenture research, overall purchase value has increased by 230% since the beginning of 2020.
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Share prices of listed companies that offer a “buy now, pay later” approach are doing very well. Affirm stock is up more than 300% since the beginning of the year.

Situational awareness:

BNPL companies may provide a lifeline to consumers struggling to make ends meet, but they also come with potential financial risks. For example, if he has multiple BNPL loans with different providers, but none of them appear on his credit report, “loan stacking” may occur, leading to a debt spiral. It may be possible to connect. Many his BNPL services do not report to the three major credit bureaus, which can hide a person’s true debt level.