Benedict Guttman-Kenney Profile picture
Feb 14, 2022 10 tweets 6 min read Read on X
♥️A valentine’s gift ♥️: New short working paper `Buy Now, Pay Later (BNPL)...On Your Credit Card’ with Chris Firth & @johngathergood @ChicagoBooth @WarwickBSchool @UoNEconomics

Paper: arxiv.org/pdf/2201.01758…

Thread ⬇️ 1/9 #saywhatyoufound #householdfinance #BNPL #econtwitter
BNPL is a FinTech credit option to defer payments into 1+ (often <5) 0% interest instalments.

Next time you shop online you’ll likely see BNPL firms (e.g. Afterpay/Clearpay, Affirm, Klarna) as a payment options 👀

🇬🇧 BNPL is larger than payday lending market at its peak! 2/9
BNPL is largely unregulated. But UK & US financial regulators (CFPB, FCA) are considering BNPL regulation.

Where's the BNPL research to inform them? Searches on ArXiv found 0 papers, on SSRN 1 (law) paper.🤯

Our paper provides a quantitative starting point for this topic 3/9
We use 🇬🇧 credit card transactions data to study BNPL.

Finding 1: BNPL instalments are commonly charged to credit cards: 19.5% of active credit cards in our 2021 data have BNPL instalment.💳

We estimate (with many caveats!) 40-50% of all UK BNPL is charged to credit cards. 4/9
Why does this matter?

Transforming a 0% interest, amortizing BNPL debt to credit card debt where typical interest rates are 20% and amortization schedules decades-long raises doubts on consumers’ ability to repay BNPL debt (e.g. see here rules applying to regulated credit). 5/9
BNPL is a rapidly growing market around the world.🌎🌍🌏

Finding 2: Charging BNPL to credit cards is growing rapidly too. 6/9
Finding 3: Charging BNPL to credit cards is most common among younger consumers. It is common across all parts of the 🇬🇧. 7/9
Finding 4: Charging BNPL to credit cards is most common in the most deprived areas (local government districts) in England.

Moving from least to most deprived area has ~30% higher BNPL usage.

The most vulnerable people using BNPL most is a warning flag for regulators. 8/9
There’s an important need for more academic research to understand BNPL and inform UK and US BNPL regulations.

Our paper is just a start.

We hope you 'buy' the paper now, and it prompts new BNPL research 'later'! 9/9 ♥️

arxiv.org/pdf/2201.01758…

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More from @gk_ben

Jan 12
Cool to have our credit card research covered in the @nytimes!!! 💳🗞️ @ChicagoBooth with @pauldadams @stefanhunt @JesseBLeary #HouseholdFinance #EconTwitter

Here's a short thread on the topic of reducing credit card debt. 1/6

nytimes.com/2024/01/12/bus…
My take:

Reducing credit card debt is like losing weight. There doesn’t seem to be a simple fix. It is hard. To reduce debt consumers need persistently both healthier consumption (spend less on credit) and more exercise (repay more). Both are painful now. 2/6
The NY Times article cites our @nberpubs paper - one part of a broader agenda studying ways to reduce credit card debt 3/6
Read 7 tweets
Oct 9, 2020
👋New work with @johngathergood evaluating recent UK local lockdowns using new real-time spending data

Paper: arxiv.org/abs/2010.04129

@EconObservatory blog: coronavirusandtheeconomy.com/question/how-c…

Thread ⬇️ 1/11
#householdfinance #coronavirusindicators #econtwitter Image
We use @fable_data - a new source of European real-time, transaction-level consumption data. We find a 0.91 correlation with comprehensive (aggregated) bank of england credit card data. Its real-time, disaggregated format facilitates studying regional consumption... 2/11 Image
We use this to inform the big policy question: How can authorities control coronavirus without killing the economy?

3/11
Read 13 tweets
May 8, 2020
Fantastic, careful @bankofengland analysis in monetary policy + financial stability reports. I know how much hard graft goes into these in normal times. Well done all!👏👏👏

Well worth a read (links at end) - much not UK specific... 1/n
#HouseholdFinance #CoronaVirusIndicators
Reports acknowledge huge uncertainty in macro forecasts. Main scenario sees massive drop but relatively sharp recovery - let's hope they are right... 2/n
Huge uncertainty among other forecasters too... 3/n
Read 11 tweets
May 1, 2020
This week's @Equifax @EquifaxInsights weekly 🇺🇸household debt update is now out. 📉🙏

🚨THEY'VE ADDED DATA ON ORIGINATIONS INCLUDING SPLITS BY CREDIT RISK AND WE ARE SEEING IMPORTANT STUFF!🚨

Here's my take.

1/8

#HouseholdFinance #CoronaVirusIndicators
OUTSTANDING DEBT (to April 20) remains unchanged

Tl; dr my summary from last week still seems the story across products on outstanding stock.



2/8 Image
OUTSTANDING CREDIT CARD debt + utilization are still falling sharply 3/n ImageImage
Read 10 tweets
Apr 26, 2020
What's the early effects of Covid-19 on US household debt (to Monday 13 April)? Thanks to great work @Equifax @EquifaxInsights we're starting to know. Here's my summary... 1/8
#HouseholdFinance #CoronaVirusIndicators
The boom in household debt since 2013 is done. Outstanding debt flattened off in aggregate and across mortgages + autos.

This is the stock so a slow-moving variable. Seeing flow of new accounts would be a more leading indicator. 2/8 Image
We are starting to see quite a sharp decline in credit card debt (both general purpose + retailer cards).

Given what we've seen in other data this is likely due to lower purchases. 3/8 ImageImage
Read 10 tweets
Jul 26, 2018
Hey @pauldadams let's thread this! A summary of four working papers on credit cards in N tweets. Especially for those interested in #HouseholdFinance #BehavioralEconomics #debt #RCTs 1/n
1 in 4 UK credit card payments are at or close to the minimum payment (US similar). Minimum payment information on credit cards appears to act as an anchor making consumers more likely to pay at or close to the minimum. How can we help consumers to pay more? 2/n
PAPER 1 - Increasing credit card payments using choice architecture: The case of anchors and prompts... 3/n
Read 22 tweets

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