Experimental evidence on Buy Now Pay Later usage and understanding

Last registered on February 01, 2024
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Pre-Trial

Trial Information

General Information

Title
Experimental evidence on Buy Now Pay Later usage and understanding
RCT ID
AEARCTR-0012765
Initial registration date
January 24, 2024

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
January 31, 2024, 11:34 AM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
February 01, 2024, 12:48 PM EST

Last updated is the most recent time when changes to the trial's registration were published.

Locations

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Primary Investigator

Name
Anu Jose
Affiliation
Central Bank of Ireland
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Other Primary Investigator(s)

PI Name
Michael King
PI Affiliation
Trinity College Dublin
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PI Name
Christopher Palmer
PI Affiliation
MIT Sloan School of Management
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PI Name
Yvonne McCarthy
PI Affiliation
Central Bank of Ireland
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PI Name
Jane Kelly
PI Affiliation
Central Bank of Ireland
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Additional Trial Information

Status
In development
Start date
2024-01-26
End date
2024-06-30
Keywords
Behavior
Additional Keywords
Buy Now Pay Later, consumer finance, digital finance
JEL code(s)
D18, G4, D14
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
Buy Now Pay Later (BNPL) recently has become one of the popular innovations in the Fintech payment sector which allows consumers to spread the cost of a product over a number of months, generally, without interest. While this payment feature offers flexibility to a number of consumers, there is a growing concern on some consumers taking up more debt than they can afford to repay coupled with lack of understanding of related terms and conditions, resulting in financial adversity. Through an online trial, we intend to study the causal effect of BNPL on consumer spending patterns, disentangling the selection and treatment effects of BNPL. Additionally, we test for effective ways to improve consumer comprehension of BNPL products and their terms and conditions.
External Link(s)

Registration Citation

Citation
Jose, Anu et al. 2024. "Experimental evidence on Buy Now Pay Later usage and understanding." AEA RCT Registry. February 01. https://doi.org/10.1257/rct.12765-2.0
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
Intervention Start Date
2024-01-28
Intervention End Date
2024-03-20

Primary Outcomes

Primary Outcomes (end points)
1. Amount of money spent - Total amount spent by participant during the shopping exercise
2. Purchase of an additional discretionary product - Binary Variable (0/1) indicating if the participant chooses to buy an additional discretionary product at the end of the shopping exercise.
3. BNPL Usage - 3.1. Binary Variable (0/1) indicating if the participant chooses BNPL during each round of shopping task, wherever BNPL is a payment option.
3.2. Number of times participant chooses BNPL in first three rounds of shopping task, wherever BNPL is a payment option.
3.3 Binary Variable (0/1) indicating if the participant chooses BNPL in fourth round of shopping if participant decides to purchase an additional discretionary product in round 4.
4. BNPL Comprehension - Correct answers to questions relating to the BNPL payment method measured as dichotomous variable and standardized score for the following questions:
• Is BNPL a credit product?
• What is the interest rate under BNPL?
• When is the second installment due for the purchase?
• Is late fee involved in case of late/non-repayment?
• What is the amount of late fee involved in case of late/non-repayment?
• Will the debt be transferred to debt collection agencies in case of late/non-repayment?
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
1. Recall of cost of each item purchased - Dichotomous variable indicating if the participant correctly recalls the price of each item purchased.
2. Recall of total amount spent - Dichotomous variable indicating if the participant correctly recall amount spent during the shopping.
3. Recall of future commitments amount - Dichotomous variable indicating if the participant correctly recall amount they have to pay in future as part of the shopping.
4. Estimation of probability of higher spending during shopping - Correctly estimating the probability of overspending (defined as spending over 50th percentile) during shopping
5. Estimation of probability of using short-term credit during shopping Correctly estimating the probability of using BNPL during shopping in any of the four shopping rounds.
6. Likelihood of future use - Variable measuring the likelihood that participant will use BNPL in future (not at all likely, moderately likely, and extremely likely).
7. Recommend to others - Variable measuring the likelihood that participant will recommend BNPL to a friend or family member (not at all likely, moderately likely, and extremely likely).
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
The survey will take approximately 20 minutes to complete. At the beginning of the experiment, participants will be screened based whether they are online shoppers. Participants will then be asked questions related to financial services usage (including credit cards and overdrafts), socio-demographic characteristics, financial literacy, delayed gratification, financial distress, financial efficacy, and attention. Then, participants will proceed to the online shopping task where they will be randomly assigned to one of four treatment arms or a control group, varying in payment option (Debit Card, BNPL) and BNPL disclosures. The shopping task involves choosing between a generic and a luxury version of a product during three separate rounds of shopping, with each participant given a notional budget constraint of €1000. While the three rounds of shopping task requires participants to buy either the luxury version or the generic version of the product using the available payment option, there will be a fourth round of shopping where participants can choose whether to buy an additional discretionary product, and if so, whether they want to use debit card or BNPL for payment. After completing the shopping task, participants will be asked about BNPL comprehension, recall of prices, and their checkout experience.
Experimental Design Details
Not available
Randomization Method
Participants are randomised to either a control group or one of the four treatment groups based on randomisation done by the Gorilla experiment builder tool.
Randomization Unit
The unit of randomisation is at individual level
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
No clusters
Sample size: planned number of observations
3000 nationally representative individuals
Sample size (or number of clusters) by treatment arms
600 in each of the experimental arms
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
Trinity College Dublin
IRB Approval Date
2023-12-05
IRB Approval Number
3010
Analysis Plan

Analysis Plan Documents

PAP_BNPL_Final.pdf

MD5: 094022b918bac94388c7a24648a19875

SHA1: 810a68ad2be601d5bb702bd8acc0e14ddf4c28c6

Uploaded At: January 24, 2024