Buy Now Pay Later isn't just for shopping addicts—it’s actually a lifeline for small businesses to get loans.
April 16, 2026
Original Paper
The Buy Now Pay Later Divide: Merchant Heterogeneity and Market Structure
SSRN · 6463259
The Takeaway
We often view 'Buy Now Pay Later' (BNPL) as a predatory tool for consumer debt. But this study shows it has a secret benefit: it helps small, 'invisible' businesses build a digital credit history. Because BNPL creates a record of successful transactions, it allows these tiny merchants to access formal bank loans for the first time, growing their revenue three times faster than larger competitors. It’s a financial 'bridge' that formalizes the informal economy. For you, it means the 'pay in four' button isn't just about consumer convenience; it’s actually changing the power dynamic between small shops and big banks.
From the abstract
We examine who benefits from Buy Now Pay Later (BNPL) and how these services shape market structure. Using novel transaction-level data from a large fintech lender and a shift-share instrumental variable, we find that BNPL adoption increases revenue growth of small, credit-constrained merchants over three times more than that of large ones. Digitization-driven formalization channel contributes to this disparity: BNPL shifts transactions from cash to digital, generating verifiable records that en