The news: Homeowners with low liquidity and maxed out credit cards are more likely to lean on buy now, pay later (BNPL) products, per a JPMorgan Chase Institute report.

JPMorgan gathered its findings by looking at anonymized bank accounts and spending data from 2019 to 2023.

Inside the insights: JPMorgan’s findings paint a picture of BNPL users turning to the products in times of emergency as an alternative credit line over a convenience tool.

• BNPL use is higher for those with maxed out credit cards and lower for homeowners with ample savings.
• Frequent installment users decrease their credit card use before closing on a house by 12% to 13% but nearly quadruple their BNPL use after closing.
• For lower-income FHA homeowners experiencing job loss, BNPL use can account for 20% of all spending.
• And first-time homebuyers who are frequent BNPL users are 8% more likely to miss a mortgage payment within the first year of closing on their home.

These takeaways point to BNPL as an important tool for consumers during periods of cash-flow shocks like first-time homebuying and job loss for some consumers. 

More financially secure shoppers, meanwhile, lean on the payment type as a strategic tool to complement existing credit lines. 

Implications for issuers: As consumers use a blend of traditional credit and BNPL to finance their purchases, issuers need a clear understanding of their debts—including BNPL debts that don’t appear on credit scores— to appraise their creditworthiness. 

Advocating for a central credit scoring method that takes into account all aspects of a consumer’s credit history from all payment firms gives lenders the best shot at gauging credit lines and not setting up consumers for financial precarity.

This content is part of EMARKETER’s subscription Briefings, where we pair daily updates with data and analysis from forecasts and research reports. Our Briefings prepare you to start your day informed, to provide critical insights in an important meeting, and to understand the context of what’s happening in your industry. Non-clients can click here to get a demo of our full platform and coverage.