Eye on BNPL: Pay-Over-Time Besting Credit Cards for Some; Afterpay Lines up More Merchants

The predictability of buy now, pay later loans and the interest-free nature of many of them is appealing to merchants, as many consumers—86%—believe the economy is uncertain, finds a new report from Affirm Inc.

Commissioned by installment-payment provider Affirm, the survey, conducted by Talker Research in March of 2,000 U.S. adults, also finds that 45% of those who have used credit cards or pay-over-time payment methods say they like the latter more than credit cards.

As for why, some possibilities are the predictability and perceived transparency of BNPL products. Forty-one percent like the fixed payments of BNPL products, and 52% choose a pay-over-time product because of concerns about late charges and compounding interest. Many BNPL payment options carry no interest, though some, like certain ones from Affirm, bear interest. That interest, however, is simple, and not compounding, meaning interest only applies to the original loan amount and not the principal and accumulating interest. Affirm also does not charge late fees.

Affirm says the findings also point out that many consumers seen BNPL products as a better option than credit cards, even though they have access to credit cards. Fifty-seven percent view these longer-term payment options help them make smarter financial decisions, Vishal Kapoor, Affirm’s senior vice president of product, says in a statement. Sixty-four percent value interest-free offers as much as traditional discounts, he says.

In related BNPL news, Afterpay, a unit of Block Inc., named 14 merchants as the latest to add its payment method as an option for their shoppers. Some of these include Huckberry, Parke, PetMeds, and Rugs Direct.

In February, Block launched Cash App Afterpay, a service that enables active U.S. Cash App users to use Afterpay’s BNPL products directly when shopping online at its partner merchant e-commerce stores. It views this as “meaningful product unlock as we deepen the connection between our ecosystems,” Block said its first quarter shareholder letter released May 1.

Block says there are more than 348,000 global sellers offering Afterpay and that 96% of all installments are paid on time.