How Does ‘Buy Now Pay Later’ Affect a Merchant's Profit?
Featuring Jan Keil
An innovative payment feature leads to more sales and profits despite attracting buyers with weaker credit profiles.
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Jan Keil
Jan Keil is an Assistant Professor of Finance at the Indian School of Business (ISB). His research focuses on disruptive and technology-driven change in financial intermediation, including payments, banking, consumer finance, and money. One current project explores the geopolitical motivations behind central bank digital currencies and their effect on payment firms (revise & resubmit at the Journal of Finance). Another project analyses behavioral and rational drivers behind buy-now-pay-later.
Key Takeaways
- Merchants can use the innovative customer payment option of buy now, pay later (BNPL) to charge different effective prices to different customers.
- BNPL can help merchants sell more, and buyers afford more, especially those with lower credit scores.
- The benefits of BNPL are not applicable to credit cards or when merchants are not the ones bearing the subsidy of the loan.