BNPL: A way to pay in a shared universe?
This blog post is part of the Finthropology series Digital Human Finance. We present qualitative research to showcase the kind of insights that can come from deeper, human-focused studies and how they can be used to build new sustainable financial solutions. We focus on the story and its potential in each presented publication.
One of the fastest-rising innovations, Buy Now, Pay Later (BNPL), is a good example of embedded finance. It is often described as a win-win-win solution where consumers are offered free credit, merchants benefit from higher sales and more loyal customers, and the payment provider gains access to new customers.
Early BNPL solutions like Klarna and Afterpay were specifically targeted at young customers–particularly women. Today, however, there is a wide range of solutions that appeal to users of all ages.
The uptake of solutions was very quick from the start. WorldPay estimates that the use of BNPL in e-commerce rose from $2 billion in 2014 to $342 billion in 2024, corresponding to 5% of global e-commerce value.
Much has already been written on BNPL models and the potential it offers in different economies. It also presents challenges, particularly with regard to over-indebtedness.
In this blog post we discuss a journal article about BNPL that focuses on the very interesting perspective of how BNPL services build and brand digital interfaces to be appealing to young users. The authors use insights from theories on collective affect and structure of feeling. Their work illustrates how the affective appeal of BNPL solutions creates a social feeling of pleasure and fun with users. This feeling resembles communities in social online spaces, like Pinterest, and is distinct from traditional financial services.
The researchers’ analysis is based on three qualitative studies conducted among young users of BNPL in Australia in 2020. The first study is a content analysis of the websites and apps offered by eleven BNPL services. The second study provides a ”walking ethnography” undertaken in 215 shops in a large Australian shopping mall with the aim of studying the physical representations of BNPL services. The third study consists of interviews with 29 young adults (aged 18–29) who had used BNPL.
Findings
The success of new technologies for payments is most often considered in the light of cost, convenience and perceived ease of use. This study, however, adds a completely different perspective to the understanding of why BNPL is attractive—and particularly why it is attractive to young women who spend much time on social media strengthening existing relations, as well as building new ones geared towards a positive future.
There are two main findings that we will describe below. The first finding explains how BNPL apps and websites make affective appeals to consumers. These are similar to those of social media’s ”cultivating affects of relatability that nurture a fun and pleasurable structure of feeling” (p. 250).
The second finding is particularly interesting from a financial perspective. It shows that BNPL solutions are offered as a ”way to pay”—making no reference to credit or debt. This gives users the feeling that they are not really taking a loan—and that indeed it is a good way to balance the use of their own money. Both findings help BNPL solutions distinguish themselves from legacy banking.
BNPL: An affective digital relational space
The first study, which analyzes websites and apps, reveals how BNPL solutions build affective appeal in user universes that connect to the aspirations of young women to be smart and successful. They ask users to share their (shopping) wishes:
“Tell us what you like to help us find the best ideas for your inspiration (Klarna)” (p. 250).
In this way, they connect with the balance between dreaming and control or self-surveillance that many young women deal with. They create a structure of feeling of community and shared experiences that are close to the experience of social media.
But where social media relate to scrapbook activities with users sharing their past activities, the ideas in the BNPL universes are directed towards aspirations and future consumption—including consumption of credit via BNPL. This is set in a context of fun and pleasure in a way that contrasts markedly with their experiences of other forms of credit. It is exemplified by reference to adverts and pictures of people—mostly women—shopping in the relaxed context of their home. But they also include photos of smart women at parties or travelling.
This finding is reflected in the interviews. Many interviewees described their use of BNPL services in affective terms, such as “my fun thing” (Alana, late 20s, p. 251) or as satisfying “wants rather than needs” (Elsie, late 20s p.251).
BNPL: A way to pay
A second finding confirmed in all three studies is that BNPL services seem to distance themselves from credit advertising, instead pitching their product as ”a way to pay”. All websites and apps focus on the ease, flexibility and ”no-stress” experience of BNPL, positioning their solution as a service to consume (the goods bought). They point out the speed and immediacy of approval, and how they offer an enjoyable service to pay. As Afterpay put it: ”Don’t just pay later. Pay better. (p. 252)”
When they carried out ethnography In shopping malls, the researchers similarly observed that the signposting of BNPL was discreet and not attention-seeking. BNPL services often placed slogans on changeroom mirrors in clothing stores to communicate affective feelings. For instance, Zip Pay told customers, “looks great, why not?” (p.254).
BNPL services even take this feeling of easy paying one step further by helping users feel like they are not only not taking credit, or even temporarily spending someone else’s money, but in fact they are spending their own money. Christie (aged 30) explained:
”… The weird thing is that I’ve always had the money there, but I’ve felt like oh I will just do it on Afterpay and that way it will feel like less money coming out, or less of like’, you know, I’m not really spending $200 on clothes, I’m just spending $50 a week’, do you know what I mean…..” (p. 254).
The interviews in the third study generally support this experience of BNPL as different from traditional credit. Interviewees said that because they were not borrowing from a bank, they felt like they didn’t really have a loan. This was well-expressed by Anna:
” ….. and then I started thinking about Afterpay and Zip Pay were different from that because it wasn’t really associated with any bank or loans or finances. I thought that that was a safer way to engage with getting a loan because it doesn’t even feel like you’re technically having a loan.”
This is a great observation that supports the experience of self-indulgence in the use of BNPL.
Balancing cost and convenience with emotions and community
BNPL is often described as a competitive way of offering consumer credit, particularly to young people, as it is fast, mobile and integrated into the shopping experience. In fact, it is a very good example of an embedded financial service that is based on competitive traits like cost and convenience.
The research we have described, however, clearly illustrates how these services distinguish themselves through their advertising. It explains how the use of emotions and relationship-building in ways similar to those used in social media creates a shared and trusted space where the customers (particularly young women) find their dreams and struggles reflected. They then use this new ”way to pay” as steps towards the future.
This is a key insight for traditional banks aiming to take their trusted customer relationships forward. This endeavour is not just a question of creating data-driven personalised offers, but also a question of creating a sense of community.
Cook, J., Davies, K., Farrugia, D., Threadgold, S., Coffey, J., Senior, K., Haro, A. and Shannon, B., 2023. Buy now pay later services as a way to pay: Credit consumption and the depoliticization of debt. Consumption Markets & Culture, 26:4, 245-257, DOI: 10.1080/10253866.2023.2219606
A short comment relating to our own work at Finthropology
At Finthropology we had the pleasure of doing a small study on the introduction of BNPL in the US including a digital ethnography study of BNPL user groups. Some of these findings were similar to the description above, but some were quite different and add other perspectives to the BNPL experience. We recognise the experience of young female users sharing how they use BNPL to buy a particularly desirable brand or to self-indulge by buying a new dress or cosmetics. And as we have seen in other research in financial services for women, the idea of a community is a spot on choice as women generally are happy to share and get help from peers.
The user groups in our study did, however, also show other experiences:
Users considered BNPL services as a varied and complex landscape where different solutions would be used for different purposes. A customer might use one BNPL service over another because it gave them a higher credit limit, let them buy a specific item like a gift card, or because they had technological issues with another BNPL service.
Users also generally turned to each other with frustration over poor service experiences with long delivery times and difficulty getting their money back when returning items.
The most common issue, however, was lack of transparency in the credit offer. Users experienced dramatic and inexplicable changes in spending limits over short periods of time. They were also unsure of fee policies and what they had to pay after missing a payment.
Overall, our research shows that while the BNPL as “a way to pay” may provide a feeling of fun and self-indulgence to some, the reality of actually using the credit element may be a different and less pleasing experience.
