Seminar @ Cornell Tech: Marco Di Maggio
Buy Now, Pay Later Credit: User Characteristics and Effects on Spending Patterns
Firms offering “buy now, pay later” (BNPL) point-of-sale installment loans with minimal underwriting and low interest have captured a growing fraction of the market for short-term unsecured consumer credit. We provide a detailed look into the US BNPL market by constructing a large panel of BNPL users from transaction-level data. We document characteristics of users and usage patterns, and use BNPL roll-out to provide new insights into consumer responses to unsecured credit access. BNPL access increases both total spending levels and the retail share in total spending, with magnitudes too large for standard intertemporal and static substitution effects to explain. These findings hold for consumers with and without inferred liquidity constraints. Our findings are more consistent with a “liquidity flypaper effect” where additional retail liquidity through BNPL “sticks where it hits”, than a standard lifecycle model with liquidity constraints.
Marco Di Maggio is the Ogunlesi Family Associate Professor of Business Administration in the Finance Unit of HBS and a faculty research fellow at the National Bureau of Economic Research. Before joining HBS, he was a faculty member in the finance and economics department of Columbia Business School. Professor Di Maggio received a PhD in Economics from MIT. Professor Di Maggio’s current research focuses on financial intermediation with a particular focus on how new technologies have disrupted financial markets and its effects on firms and individuals. His work has been published in leading academic peer-reviewed journals such as the American Economic Review, Journal of Finance, Journal of Financial Economics, and has been widely cited by outlets such as the Wall Street Journal, The Economist, Bloomberg, Institutional Investor, CNBC, Slate and Forbes. In 2016, Poets and Quants named him to its list of the Best 40 Under 40 Business School Professors. In July 2022, he became Director of the newly created Fintech, Crypto and Web3 Lab at Harvard. This is a cross-disciplinary lab with the mission to foster collaborations between the school and companies in these nascent industries to improve our understanding of the opportunities and challenges.