New trends boost US consumption

VTV.vn - With a simple model and great interest from consumers, it is not surprising that buy now, pay later services are experiencing explosive growth in the US.

Buy now, pay later boosts year-end spending in the US

In the US and other Western countries, the year-end holiday season is approaching. This is also one of the busiest shopping and consumption occasions of the year. Rating agencies have also begun to make their first forecasts about people's spending situation this year.

US consumers are expected to spend $253.4 billion online during the holiday season later this year. This represents a 5.3% increase from the same period last year, still significant, but much slower than the 13% average increase over the past 10 years, according to Adobe Analytics. This shows that rising prices due to tariffs and a weak labor market are affecting the psychology of US consumers.

And in that context, one factor expected to contribute to the growth of online spending this year is buy now, pay later. Experts predict that about 20.2 billion USD will be spent on this form of shopping, an increase of 11% compared to last year.

A recent PayPal survey found that nearly 80% of those who have used or considered using buy now, pay later said they plan to use it for holiday shopping this year. This shows that buy now, pay later is becoming an increasingly popular choice with American consumers, especially younger customers.

Young people are the top target group with about 10% of millennials and Generation Z using buy now pay later services.

Buy now, pay later attracts consumers in the US

From social networking sites, more and more young people in the US like Mr. Randis share about using buy now pay later service in daily life. Mr. Randis Dennies - user of buy now pay later service said: "It helps me to orient better, have more ways to pay when necessary".

According to eMarketer, more than 86 million Americans used buy now, pay later services last year. This year, that number is expected to reach more than 91 million. Young people are the top target audience, with about 10% of millennials and Generation Z using this service.

The appeal of buy now, pay later comes from the "pay in 4 installments" model, which includes paying 1/4 of the purchase payment in advance and paying the remaining amount in 3 installments every 2 or 4 weeks, interest-free - convenient for moderate-sized consumption such as buying fashion items, gifts or concert tickets.

Professor Barry Babin - Head of the Department of Marketing, University of Mississippi shared: "The advantage is that consumers can shop without using a credit card, because making a card requires checking history and credit score. Some people also use it as a form to try it out, return it during the loan period if they do not intend to buy it anymore."

In addition, buy-now-pay-later platforms are also directly challenging credit cards, by providing this service with large payments, long terms from 6 months to a year and interest rates.

Recently, many online retailers and applications such as Walmart or Doordash have also joined hands with buy-now-pay-later platforms to add this option for customers, helping to further expand coverage to essential items such as food. According to online financial platform LendingTree, as of September, the number of users of buy-now-pay-later services for food and groceries has increased by 14% compared to the same period last year.

The explosion of buy now pay later platforms

With a simple model and huge consumer interest, it's no surprise that buy now, pay later services are experiencing explosive growth in the US and globally.

The global buy now, pay later market has surpassed $23 billion this year, with a projected growth rate of more than 8% over the next decade, driven by the deep integration of this service into e-commerce platforms, according to research firm Precedence. North America accounts for about 30% of the global market share, focusing on items such as electronics and home appliances.

Leading buy-now-pay-later platforms like Klarna, Affirm, and Afterpay are also growing steadily. Notably, startup Klarna made the largest IPO this year on the New York Stock Exchange, raising $1.37 billion. The attractiveness of this market has also attracted the entry of a number of large banks and payment units such as Paypal, Citi, and JPMorgan.

Experts have advised consumers to be more careful when using buy now pay later services.

Consumers need to be careful when buying now and paying later.

However, in addition to the strong boom, the buy now pay later service also raises concerns about the negative impact on the financial health of American consumers. Because easier borrowing can lead to spending beyond one's means, accumulating many debts at the same time. Experts have advised consumers to be more careful when using this service, to avoid financial risks.

While it may feel good to consumers, pay now is still debt and can cause financial stress if not managed well. According to a recent LendingTree survey, “more than half of pay now users have missed at least one payment.”

This will be even more important when, starting this fall, data on P&L debt will be included in the popular credit scoring system in the US by the credit scoring organization FICO. At that time, late payments, or failure to pay P&L debt can negatively affect personal credit scores.

“Think twice about buying something you can’t afford,” advises Professor Barry Babin, head of the Marketing Department at the University of Mississippi. “It’s always a smart rule, and it’s always true. Leasing or buying on credit isn’t always a bad choice. In many cases, it’s a reasonable and meaningful choice for consumers. However, always think not just about the immediate gratification of getting the product, but also about the long-term consequences. Calculate how long you’ll have to maintain the installment contract, how much it will cost. You may end up paying three times more than if you bought the product outright.”

If you have used the service, you need to manage your debt properly, especially when your installment loans do not come due on a monthly or 30-day cycle. Without proper planning, you may forget to make payments and incur additional fees and interest.

Experts recommend that if you have multiple debts, you can focus on "paying off the smallest debt first" to create psychological momentum, or focus on "dealing with the debt with the highest cost first" to reduce overall costs. Reducing unnecessary spending and increasing income are also important measures to effectively get out of debt.

Source: https://vtv.vn/xu-huong-moi-thuc-day-tieu-dung-my-100251009103141452.htm