The Rise of E-Wallets and Buy-Now-Pay-Later: Payment Competition, Credit Expansion, and Consumer Behavior / Wenlong Bian, Lin William Cong, Yang Ji.

Format:

Book

Author/Creator:

Bian, Wenlong.

Contributor:

National Bureau of Economic Research.

Cong, Lin William.

Ji, Yang.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31202.

NBER working paper series no. w31202

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

The past decade has witnessed a phenomenal rise of digital wallets, and the COVID-19 pandemic further accelerated their adoption globally. Such e-wallets provide not only a conduit to external bank accounts but also internal payment options, including the ever-popular Buy-Now-Pay-Later (BNPL). We examine, for the first time, e-wallet transactions matched with merchant and consumer information from a world-leading provider based in China, with over 1 billion users globally and a business model that other e-wallet providers quickly converge to. We document that internal payment options, especially BNPL, dominate both online and on-site transactions. BNPL has greatly expanded credit access on the extensive margin through its adoption in two-sided payment markets. While BNPL crowds out other e-wallet payment options, it expands FinTech credit to underserved consumers. Exploiting a randomized experiment, we also find that e-wallet credit through BNPL substantially boosts consumer spending. Nevertheless, users, especially those relying on e-wallets as their sole credit source, carefully moderate borrowing when incurring interest charges. The insights likely prove informative for economies transitioning from cash-heavy to cashless societies where digital payments and FinTech credit see the largest growth and market potential.

Notes:

Print version record

May 2023.