Abstract: Buy Now, Pay Later (BNPL) is among the most expensive ways for retailers to accept payment, yet adoption has grown rapidly, raising the question of what retailers gain by paying a premium over credit cards. Prior work explains the appeal through price discrimination: retailers offering their own in-house (first-party) BNPL can extend credit to financially constrained shoppers and effectively charge them more while leaving posted prices unchanged. We instead study the increasingly prevalent case of third-party BNPL services provided by external lenders such as Klarna, Afterpay, and Affirm, where a retailer posts one price for all customers and cannot price discriminate by payment method. We first show in two online experiments that BNPL lowers consumers’ price sensitivity. We then simulate retailer profits from these same experimental data and find conditions under which BNPL is more profitable than credit card sales and less conducive to price promotion. We then to secondary data about retailer BNPL adoption and its financial consequences. We create a firm-quarter panel of 511 publicly traded U.S. retailers and a hand collected panel of the price promotion activites of those retailers. We first conduct an exploratory analysis of predictors of retailer adoption of BNPL.  Then, using difference-in-differences and staggered event-study estimators, we establish that BNPL adoption is followed by decreases in the frequency and depth of price promotions; a rational response to lower customer price sensitivity. We examine other financial impacts and find that BNPL adoption leads to higher sales, inventory turnover, and gross profit, The findings position BNPL payment methods as a strategic substitute for price promotions. Keywords: Buy Now, Pay Later (BNPL); price sensitivity; payment methods; retail performance; price promotions; retailer strategy.

Abstract: We investigate the impact of using buy-now-pay-later (BNPL) services on the expected conflict over one’s purchases with the spouse and the perceived justifiability of individual purchases made by spouses. BNPL services, ubiquitous at the checkout across stores, are a new generation of microfinancing services that provide interest-free installment plans for even relatively low-ticket purchases. BNPL services allow only a fraction of the total bill to be charged at the time of purchase, with other charges split across subsequent periods. This paper presents a theoretical background, a set of testable hypotheses, and studies to test the proposed hypotheses. Across our exploratory survey and three experiments, married participants anticipated less conflict with their spouses and greater justifiability of the purchases to their spouses using BNPL than if the same purchases were charged to credit cards. We found perceived advantages of BNPL on two proposed mediators. BNPL services make people believe that their spouse will see the cost of the items as smaller than if the same items were purchased via credit card. Besides, BNPL services make people believe it is more likely that they can make the purchase without the purchase causing the spouse to see opportunity costs for their own separate or joint purchases – what we called slack sufficiency. We showed these mediational paths in perceptions of the buying spouse (experiment 1) and the nonbuying spouse (experiment 2). In experiment 3, we manipulated slack sufficiency and found it causally reduced anticipated spousal conflict and elevated the perception of justifiability of purchases to the spouse. Finally, an internal meta-analysis across our entire file drawer provided consistent support for the predicted effects.

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