Buy now, pay later, without reducing credit card loans, says TransUnion
Sept. 23 (Reuters) – Borrowers who request “buy now, pay later” or other point-of-sale financing tend not to pay off their credit card debt as much as the general population, the general population said on Thursday. credit reporting company TransUnion.
The finding, from a new study, says credit card lenders may not have lost as much business as suspected during the pandemic due to the rise of “buy now, pay” plans. later”.
“These new forms of financing increase the credit pie, opening up more opportunities for consumers and lenders,” said Liz Pagel, senior vice president of consumer loans at TransUnion (TRU.N).
The study looked at the credit profiles of more than 4.5 million people who applied for point-of-sale financing from October 2019 to March.
TransUnion found that a smaller portion of those who applied had reduced their card debt, 54%, compared to 60% of the general population. Some 20% increased their card debt by more than half.
Although fintech companies have lured buyers with additional ways to borrow, the big banks have continued to predict that card loan income will rise as card balances rebound after being paid off during lockdowns in the market. coronavirus.
The study did not determine how much additional card lending banks lost to “buy now, pay later.”
In a separate TransUnion survey in August, one-third of people who had used a “buy now, pay later” plan said they would have used a credit card had the plan not been available.
Those who apply do not appear to increase the risk of losses on existing loans, TransUnion said. The delinquency rates on their credit cards six months after their application were only slightly lower than the general population at 3.2% from 2.7%.
“It doesn’t seem, at this point, that consumers are leaning on themselves,” Pagel said.
Report by David Henry in New York Editing by Mark Potter
Our standards: Thomson Reuters Trust Principles.