Why Buy Now, Pay Later deserves a second look

[SINGAPORE] Buy Now, Pay Later (BNPL) services have transformed online shopping, promising the instant gratification of purchases split into interest-free installments. From sneakers to groceries, consumers are increasingly using BNPL to spread out costs without feeling the pinch—at least initially. But beneath the glossy marketing lies a riskier reality. As BNPL becomes woven into essential spending, we must ask: Is this innovation reshaping consumer finance for the better, or is it accelerating habits that chip away at financial resilience?

Delayed Regret and Lost Control

In the past, major purchases involved planning, saving, and delayed reward. BNPL upends this: you take the product home now and worry about payments later. This instant access erodes the pause that once let buyers weigh necessity against desire. Behavioral economists call this “present bias”—we favor immediate rewards, even when long-term costs rise. The problem is, by the time buyer’s remorse sets in, the commitment is locked. Industry data from 2024 shows a 20% rise in payment defaults among BNPL users, highlighting how often consumers overcommit.

The Hidden Costs of ‘Free’ Credit

BNPL’s marketing centers on “zero interest,” but the fine print matters. While many small-ticket items come with no fees, larger or longer-term plans often carry interest rates comparable to or even exceeding credit cards. Worse, BNPL transactions are typically linked to debit or credit cards. If you miss a BNPL payment, you risk late fees; if you carry the linked credit card balance, you may end up paying compounding interest. A 2023 Singaporean consumer survey revealed that 35% of BNPL users misunderstood or ignored these downstream costs, ending up deeper in debt.

The Psychology Behind the Click

Perhaps the most underestimated danger lies in how BNPL reshapes consumer psychology. Breaking an $80 payment into four $20 installments makes it feel smaller, even trivial, encouraging impulse buys. Research from the Monetary Authority of Singapore notes that younger consumers using BNPL spend 25% more per transaction than peers paying upfront. This pattern cultivates a subtle dependency: over time, it conditions people to finance regular spending rather than budget for it, setting up lifelong debt habits. For merchants, it’s a dream. For consumers, it’s a creeping liability.

What We Think

BNPL can be a smart tool—but only for disciplined spenders who understand the terms and use it sparingly. The real risk emerges when consumers treat it as a safety net rather than a payment strategy. As BNPL integrates into essential expenses like groceries, the line between managing cash flow and accumulating stealth debt blurs. Financial resilience is not about clever installment plans; it’s about living within one’s means. Regulators, educators, and consumers must all play a role in ensuring that BNPL enhances—not erodes—financial wellbeing. In the end, the surest satisfaction still comes from buying what you can truly afford.