The Economics of "Buy Now, Pay Later": A Merchant’s Perspective
By Jan Keil, Tobias Berg, Valentin Burg, Manju Puri
Journal of Financial Economics
Citation
Keil, Jan., Berg, Tobias., Burg, Valentin., Puri, Manju. (2025). The Economics of "Buy Now, Pay Later": A Merchant’s Perspective Journal of Financial Economics .
Copyright
Journal of Financial Economics, 2025
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Abstract
“Buy Now, Pay Later” (BNPL) is a key innovation in consumer payments. It bundles the sale of a product with a subsidized loan, effectively offering lower prices to low-creditworthiness customers. BNPL thereby allows merchants to price-discriminate among customers with different willingness-to-pay. Consistent with a price-discrimination mechanism, we show that BNPL increases sales by 20%, driven by low-creditworthiness customers and products where market power is larger. We find that the benefits of offering BNPL significantly outweigh the costs for the merchant. Our findings help to explain the surge in popularity of BNPL in e-commerce around the world.

Jan Keil is an Assistant Professor of Finance at the Indian School of Business (ISB). His research focuses on disruptive and technology-driven change in financial intermediation, including payments, banking, consumer finance, and money. One current project explores the geopolitical motivations behind central bank digital currencies and their effect on payment firms (revised and resubmitted to the Journal of Finance). Another project analyses the economics of buy-now-pay-later (BNPL) for e-commerce merchants (revised and resubmitted to the Journal of Financial Economics).

Professor Keil has published in the Journal of Financial and Quantitative Analysis and served as a referee for the Review of Financial Studies. He has worked with Manju Puri, Tobias Berg, Thorsten Beck, and Steven Ongena.

He has received research grants from the German National Science Foundation (DFG) and the University of Zurich. Prior to joining ISB, he was affiliated with Humboldt University in Berlin and the University of the West Indies in Kingston, Jamaica. Professor Keil holds a PhD in Economics from the New School for Social Research, New York, and an MA-equivalent diploma in Political Science from Goethe University, Frankfurt.

Jan Keil
Jan Keil