Though ‘buy now, pay later’ loans are increasingly popular, critics argue that they encourage high costs and unsound borrowing. This column examines how such services influence conventional bank credit markets. Using loan-application data from a Nordic bank that also provides both traditional consumer loans and ‘buy now, pay later’ – allowing applicants’ creditworthiness to be assessed in the light of more comprehensive transaction data – the authors find that ‘buy now, pay later’ benefits both lenders and borrowers. It enhances risk assessment, fosters learning, and promotes financial inclusion by improving credit access and outcomes for higher-risk borrowers and underserved consumers.
The rapid rise of ‘buy now, pay later’ (BNPL) services has transformed the way consumers finance their purchases (Cornelli et al. 2023). While critics argue that BNPL increases sales by encouraging overspending and financial instability (DiMaggio et al. 2022, Berg et al. 2024), new research suggests that BNPL may actually benefit both consumers and lenders by improving credit market efficiency. Using data from over one million unsecured loan applications at a Nordic bank that also provides BNPL services, we explore how private BNPL transaction data influence traditional credit markets (Laudenbach et al. 2025). Our findings highlight BNPL’s potential to enhance credit access, improve lending decisions, and promote financial inclusion.
BNPL can act as a gateway to traditional bank credit
We utilise proprietary data from a Nordic bank that offers both BNPL services and traditional consumer loans. A unique feature of these data is that they contain and identify both BNPL transactions and repayment histories, as well as detailed records of bank loan applications, approvals, interest rates, and repayment. While public credit registries often exclude BNPL data, this bank’s internal records provide a rare and comprehensive view of how BNPL usage interacts with mainstream credit markets. This allows us to analyse borrower behaviour with greater precision and assess the impact that BNPL data availability has on credit decisions.
One of the study’s key findings is that customers with a BNPL history are significantly more likely to be approved for a regular bank loan. Those with a strong BNPL repayment record see an increase of nearly 30 percentage points in loan approval probability compared to those without BNPL experience. This effect is present even when comparing individuals with similar external credit scores, suggesting that private BNPL data serve as a valuable risk assessment tool for banks.
The benefits are not uniformly distributed, however: customers with a history of late BNPL payments are less likely to secure a traditional loan, illustrating how BNPL records serve as an additional screening mechanism. This finding aligns with prior research on the role of alternative credit data in financial decision-making.
The bank that provided data for this study has a policy of using BNPL information for its internal credit assessments only if applicants have a recent and sufficiently frequent BNPL transaction history. This makes it possible to divide BNPL users into two groups: ‘internal’ customers and ‘external’ BNPL users (those with few or older transactions). The latter serve as a useful comparison group because they have similar BNPL experiences as internal customers, but the bank does not incorporate their BNPL data into its loan decisions.
Table 1 Loan approvals and interest rates offered, by BNPL usage
BNPL data raises credit access and allows for price discrimination
Internal BNPL customers applying for a bank loan have an internal credit score approximately eight to ten points lower than comparable external applicants, highlighting the role of private BNPL data in credit risk assessments. On average, these improved risk assessments lead to internal BNPL customers being accepted for a loan at a rate of 78.3%, compared to 61.7% for external BNPL customers and just 29.6% for applicants without any BNPL history.
Beyond improving credit access, BNPL data also affect loan pricing. We find that BNPL users with a good repayment history receive an average interest rate rebate of 1.4 percentage points – approximately 15% lower than the market rate corresponding to their external credit profile. This suggests that lenders use BNPL transaction data to offer more competitive rates to low-risk borrowers while maintaining profitability through price discrimination.
Table 2 Interest rate differences by risk category
Our study identifies a novel pattern in loan pricing: customers classified as ‘revealed low risk’ – those who appear risky based on external credit scores but have a strong BNPL history – pay lower interest rates than their external risk profile would suggest, but still more than applicants with strong internal and external risk profiles. Conversely, ‘revealed high risk’ customers – those with strong external credit scores but negative BNPL records – face higher interest rates than low-risk customers, but lower rates than their internal risk profile would suggest. This asymmetric pricing strategy allows the bank to internalise competitive conditions resulting from information differences between lenders and extract value from their private BNPL data while mitigating risk.
Learning from BNPL improves repayment behaviour
One of the interesting implications of the study is the evidence of a learning effect among BNPL users. Borrowers with prior BNPL experience demonstrate better repayment behaviour and lower default rates on traditional bank loans. Internal BNPL customers are 10 to 12 percentage points less likely to have a 30-day payment delay on their bank loans compared to external customers. This suggests that BNPL can thus potentially serve as a stepping stone for consumers to develop better financial habits.
Interestingly, the improved repayment behaviour is present even among BNPL users who do not receive preferential interest rates. This implies that the experience of managing BNPL payments itself contributes to financial discipline, rather than just the favourable credit terms offered by the bank.
Policy implications and conclusions
The ‘but now, pay later’ revolution is reshaping consumer finance in ways that extend far beyond retail purchases. By serving as both an information-enhancing tool and a financial learning mechanism, BNPL can help bridge the gap between underserved borrowers and mainstream credit markets. As regulators and financial institutions navigate this evolving landscape (Doerr et al. 2023, Babina et al. 2024), insights from BNPL data illuminate how credit markets can be made more inclusive and lending made fairer and more efficient.
Our findings have implications for regulators and financial institutions. While BNPL has often been scrutinised for its high costs and potential to encourage unsustainable borrowing, this study highlights its role in improving credit access for underserved consumers. Policymakers should consider these positive spillover effects when designing regulations for BNPL services.
For banks and fintech lenders, our study underscores the strategic advantage of integrating BNPL data into credit risk assessments. By leveraging private BNPL information, lenders can enhance loan origination models, offer more tailored credit products, and potentially expand financial inclusion without significantly increasing default risk.
source: cepr.org
