When spending more feels like less: the influence of the buy-now-pay-later payment method on consumer spending behaviour

A new type of buy-now-pay-later payment method allows consumers to own their purchases prior to payment by interest-free instalments. Despite rapid growth and consumer self-reports that buy-now-pay-later increases spending, research has not yet explored why this payment method impacts spending behaviour. The purpose of this research is to investigate the underlying psychological mechanisms that influence consumer spending behaviour when using buy-now-pay-later to address this research gap. The results across three experiments indicate that buy-now-pay-later influences consumer spending behaviour in a novel way. The numerosity heuristic, the tendency to infer greater quantity from larger numbers, influences consumers to perceive purchases as less expensive with smaller instalment prices compared to total prices. Consumers perceived that purchases were less expensive and felt less pain of payment when using buy-now-pay-later, leading to increased spending behaviour such as increased purchase intent, the purchase of more expensive items, and an increased amount spent. This explanation, supported by empirical evidence for the influence of buy-now-pay-later on consumer decision-making, extends the current theoretical understanding of the effects of payment modes on consumer spending behaviour, with practical implications for policymakers and retailers.