In holiday season, more people in US to 'buy now, pay later'

SAN JOSE, California: This holiday season, more U.S. consumers are expected to use "buy now, pay later" payment plans, which are short-term loans that often come with low interest rates and allow shoppers to make an initial payment at checkout, then pay the outstanding amount in installments.

The payment method appeals to shoppers who purchase multiple gifts for family and friends during the holidays, especially those who are balancing other debts, such as student loans and credit cards.

Younger consumers and those with difficulty accessing credit are reported to be more likely to use 'buy now, pay later.'

According to a recent Adobe Analytics report on online shopping, short-term installment loans accounted for US$6.4 billion of online spending in October, up six percent year-over-year. Overall, Adobe forecasts that 20 percent of Americans plan to use 'buy now, pay later' to purchase holiday presents.

Vivek Pandya, lead analyst for Adobe Digital Insights, said, "Rising interest rates, inflation in food prices, and resuming student loan repayments have increased costs for consumers, but data has shown that the consumer remains resilient heading into the big holiday season and they are embracing every opportunity to manage their budgets in more efficient ways."

Most "Buy now, pay later" models involve lenders running a soft credit check on applicants, then asking for a down payment at the time of purchase along with an agreement to make between four and six payments at two-week intervals. Zero-interest loans are common initial offerings.

However, if customers pay late or miss payments, they can be shut out from using the app or charged interest or fees.

Retailers have discovered that customers offered "buy now, pay later" options are likelier to have bigger cart sizes or convert from browsing to buying.

Federal Reserve studies have found that customers spend some 20 percent more when buy 'now, pay later' is an option.