Consumers turn to buy now, pay later for essential expenses — with growing risks
Some consumers are using buy now, pay later for essential expenses like groceries, rent and utility bills. But more BNPL users have recently had a late payment.
The trend of consumers using buy now, pay later (BNPL) services for essential expenses is concerning, as it suggests that some individuals are struggling to manage their finances. The fact that more BNPL users have recently had a late payment indicates a growing risk of default, which could have implications for the broader financial system. This development is particularly relevant for bond investors, as it may impact the credit quality of consumer debt.
The increasing reliance on BNPL services for essential expenses also highlights the challenges faced by consumers in managing their financial obligations. With interest rates rising, the cost of borrowing is increasing, and consumers may be turning to BNPL services as a way to cope with financial stress. However, this approach can lead to a debt spiral, as consumers may struggle to keep up with payments and accumulate more debt.
To watch next: The performance of consumer debt, particularly in the BNPL sector, and any potential regulatory responses to address the growing risks. Bond investors should monitor the credit quality of consumer debt and assess the potential impact on their portfolios. Additionally, they should keep an eye on economic indicators, such as unemployment and inflation rates, which can influence consumer financial stability and the overall credit environment.
Originally reported by cnbc.com. BondNews adds analysis for finance & markets readers.