By Sabrina Lynch
- 46% of African-Americans and 56% of Hispanic communities are more likely to use the short-term lending options like BNPL
- The BNPL market is expected to reach $3.98T by 2030
As the saying goes, beware a wolf in sheep’s clothing, especially when that wolf is touting financial independence through Buy Now, Pay Later (BNPL) offerings. New research has revealed that BNPL business models are continuing to prey on financially illiterate shoppers, who are plunging more and more into debt. Instead of gaining the upper hand in wealth equity, 46% of African-Americans and 56% of Hispanic communities are more likely to use the short-term lending options like BNPL at least once within the past year to stay afloat, fueling a market that’s expected to reach $3.98 trillion by 2030.
Why This Matters: BNPL isn’t making it easier for kinfolk to stay on top of financial arrears. Currently, more than one in four Black households, around 27%, are late on paying back debts, according to Prosperity Now. This “quick fix” behavior is dangerous for financially vulnerable households who are working hard to rebuild their credit, using the full alphabet of lenders on the market, from Affirm (AFRM +3.93%) to Zip.
Within the first two months of this year, the number of grocery shoppers using Buy-Now-Pay-Later (BNPL) services grew 40%, followed closely by shoppers with their eye on new home furnishings at 38%. BNPL continues to rise to prominence as an alternative means to getting a credit card. This is understandable if consumers have been scarred by past memories of creditors banging at their door.
Currently, 69% of existing BNPL users have revolving credit card debt that carries over month to month. With high fees, inconsistent consumer protections, and encouragement by retailers to borrow more by purchasing more, People of Color are still being set up for failure in any ambitions they have to build generational wealth.
What’s Next: Bite-sized payments over time may seem like a great alternative but the reality is that it’s still risky. Inflation continues to erode household budgets, pushing the need for new financial “olive branches” to be introduced into the market that ensure Black communities don’t overstretch themselves.
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