Indore (Madhya Pradesh): A new study by researchers from the Indian Institute of Management (IIM) Indore has found that Buy Now, Pay Later (BNPL) schemes influence consumer decisions far more deeply than previously understood, shaping whether shoppers complete purchases, abandon carts, or opt for immediate payment methods.
The study, titled “When ‘Pay Later’ Means ‘Pay Now’: How Deferred Payment Options Shape Choice,” has been published in the Journal of Retailing and Consumer Services.
It was authored by Prof Sanjeev Tripathi and DPM participant Pritam Kumari of IIM Indore.
The research examined consumer responses when retailers offer both traditional “Buy Now, Pay Now” (BNPN) and deferred payment alternatives at checkout.
The study was conducted through seven experiments involving more than 1,708 participants in the United States. Data for all studies were collected through the Prolific online research panel.
According to the researchers, the studies provide strong empirical support for the proposition that BNPL options can influence consumer decision-making by enhancing psychological perceptions of a deal and reducing purchase abandonment.
The findings revealed that simply adding a BNPL option alongside the default BNPN payment method significantly reduced purchase abandonment.
In a second study conducted in a different purchase context, researchers identified deal perception as the key psychological mechanism behind this effect.
Presenting BNPL together with BNPN created a stronger perception of a bargain, encouraging consumers to complete purchases rather than abandon them.
The effect remained robust even after controlling for factors such as income, financial constraints, financial literacy, attitudes toward money, and novelty associated with payment methods.
Another experiment examined consumer behaviour when BNPL carried no surcharge.
Researchers found that zero-surcharge BNPL not only reduced purchase abandonment but also decreased the likelihood of consumers choosing immediate payment options.
The study further explored the impact of high-surcharge BNPL alternatives.
Researchers found that a high-cost BNPL option acted as a decoy, increasing the attractiveness of the BNPN alternative. As a result, consumers were more likely to select immediate payment while still being less likely to abandon their purchases.
In another experiment, the introduction of a high-surcharge BNPL option increased BNPN preference and reduced purchase abandonment more effectively than simple price reductions, even though the BNPN price itself remained unchanged.
The findings contribute to ongoing discussions in consumer psychology, pricing strategy, and payment systems. The study extends theories of dual pricing, comparative decision-making, and decoy effects into the rapidly expanding BNPL marketplace.
The researchers noted that payment systems should not be viewed merely as financial tools but also as behavioural mechanisms that shape value perceptions and influence consumer action.
According to the study, the implications are particularly significant for retailers designing checkout experiences.
Rather than relying solely on discounts that erode profit margins, firms may be able to strategically structure payment alternatives to encourage purchases while maintaining pricing integrity.
The study concludes that BNPL design has emerged as a powerful choice-architecture tool capable of influencing both consumer preferences and retail outcomes.
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