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The Psychology Behind Buy Now Pay Later
Buy Now Pay Later (BNPL) is an increasingly popular service that has become ubiquitous in both brick and mortal businesses and the digital landscape. The concept of BNPL is nothing new, but what makes these services so appealing is their psychological trick in how they eliminate the pain we feel that’s usually associated with paying for something. Research has found that spending money triggers areas of the brain associated with pain and disgust and that different forms of payment trigger different levels of discomfort [1].
Cash
Cold harsh cash, the most tangible form of payment elicits the greatest psychological pain even when the payment amounts are the same. One reason for this is that cash is a physical representation of value and that humans have a bias towards avoiding losses. The transactional process involves counting the correct amount of cash which is then physically handed over in exchange for a product. This adds mental friction to the overall process as they see themselves losing money in real-time. Interestingly, despite being more painful, the trade-off here is that people generally assign more value or connection to the product or service post-transaction [2].
Credit Cards
Credit cards can be considered a prototype to BNPL as it uses the same premise, albeit the only…