CHICAGO, May 25, 2022 (GLOBE NEWSWIRE) — As awareness and usage of Buy Now, Pay Later (BNPL) and Point of Sale (POS) financial offerings continue to grow, new research from TransUnion (:TRU) examined the risk profiles of consumers who use these products and found that, compared to the general credit population, BNPL/POS consumers tend to be younger and belong to the lower risk levels. These consumers are also likely to be more active during the holiday season and tend to use the same POS lenders multiple times.
The study, “Evolution of the Maturing POS/BNPL Consumer,” was released at the LendIt FinTech 2022 conference and examined the behaviors and demographics of over 9 million consumers with a point-of-sale finance survey from the fourth quarter of 2019 to the fourth quarter of 2021.
BNPL and POS financing has become an extremely popular offering with consumers in recent years. In a recent TransUnion survey, seven in 10 consumers (71%) said they had heard of BNPL, and 38% said they had used these services in the past year.
Gen Z and Millennials (18-40) make up the vast majority of consumers who requested such financing during the study period (61%). By comparison, only 35% of the general credit workforce falls into this age bracket. Additionally, POS funding applicants were more likely to belong to higher risk levels. About 43% of all POS finance applicants were found to be at the subprime risk level, compared to 15% of the general credit labor force.
“The simplicity and convenience of BNPL and POS is driving consumer interest in these products,” said Salman Chand, vice president of consumer lending at TransUnion. “The consumers most likely to use point-of-sale financing tend to be younger and below prime. But as this market matures, we’re likely to see more and more consumers at all levels take notice and start using these products.
The study also found that consumers were more likely to use POS financing during the holiday shopping season, with 30% of all applicants applying for a POS financing loan during the roughly one-month period that includes Thanksgiving and Christmas. Additionally, consumers were also more likely to have gone to the same lender when applying for multiple point-of-sale financing loans: 71% of applicants with three or more applications used the same lender for all of those applications.
“Point-of-sale consumers are very likely to use the same lender for most of their shopping needs, presenting a great opportunity for lenders to build customer loyalty by getting to consumers early. And as lenders plan to launch or promote their BNPL and POS products, the holiday shopping season is an ideal time to focus their efforts due to the much higher level of consumer demand during this time,” Chand added.
BNPL and POS loans on credit report can help promote financial inclusion
To help promote financial inclusion opportunities for this growing population and enable the financial community to accurately capture the credit behaviors of consumers using BNPL loans and other point-of-sale installment payment products, TransUnion announced the future launch of a suite of point-of-sale solutions earlier this year. Solutions allow transactions to be received from lenders at the point of sale through the traditional credit reporting process, with specific Metro 2 information® reporting guidelines that ensure compliance with the FCRA.
Financial institutions will be able to choose to receive these commercial lines as part of the delivery of their existing credit data. Delivery of the default credit report, which feeds into existing rating models, is unaffected. Over time, as the industry strives to improve models with these business lines, it is expected that many lenders will choose to use this information in addition to their existing models to help expand their buy boxes, which accelerates impact on consumers and promotes financial inclusion. To learn more about TransUnion’s approach to the BNPL and POS industry, click here.
“The adoption of BNPL and POS loan data represents one of the most significant opportunities for financial inclusion in a generation, helping the millions of people in the United States who have thin, damaged or no credit records to build credit responsibly.While there is currently a lot of noise in the market as to how this data asset will be integrated into the credit file, the ultimate goal is to have a single standard for lenders POS to report this data and accelerate adoption by lenders and rating providers in the future,” said Liz Pagel, senior vice president of consumer lending at TransUnion. “TransUnion’s approach, which include data on the main file in 2022 with an “on/off” switch, give our data users time to adjust their models to use the data in a way that helps consumers accumulate credit.”
More information on the TransUnion study, Evolution of the POS / BNPL Maturation Consumer, can be found here.
About TransUnion (:TRU)
TransUnion is a global information and knowledge company that enables confidence in the modern economy. We do this by providing an actionable picture of each person so they can be reliably represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call it Information for Good®.
A leading presence in more than 30 countries on five continents, TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people.