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5 things black America needs to know

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According to Lending Tree, some 43% of Americans have used a buy-it-now, pay-later (BNPL) service this year. That’s up from 31% in 2021. Apple is now looking to capitalize on market growth.

BNPL is a retail payment option that allows consumers to split a purchase into smaller installments; most services are interest-free and free of charge – as long as payments are made on time.

Apple, which already owns Apple Pay and a credit card launched three years ago with Goldman Sachs Group Inc., is expected to launch its own BNPL service later this year.

Apple Pay Later will allow consumers who buy with Apple Pay to split their purchases into four payments every two weeks. Apple will guarantee the loans and fund them, the Wall Street Journal reported.

Apple will rely on credit reports and FICO scores to verify applicants’ financial status before approving BNPL funding.

Here are five things black America needs to know.

1.The BNPL market for Apple

Gen Z, black adults and Hispanic adults are more likely to use BNPL than the U.S. population as a whole, Morning Consult reported. About 12% of black households used BNPL, compared to 9% of white households.

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Younger and less financially healthy households are four times more likely to use BNPL

And more and more people in general are turning to BNPL. Almost half (46%) of users had used BNPL three or more times in the previous 12 months, as of November 2021, Morning Consult reported.

2. Increasing late payments

BNPL users tend not to be financially sound; they often have difficulties with credit. Thus, 43% of BNPL users report having subprime credit ratings, compared to 24% of non-users. And, 77% of BNPL users who also have credit cards with outstanding balances, compared to just 49% of non-users, according to the Financial Health Network.

Because many BNPY users are struggling financially, the number of late BNPL payments is on the rise. According to the Morning Consult survey, 20% of BNPL users missed a payment in January 2022. Another survey, that of Lending Tree, found that 42% of BNPL users made a late payment.

3. Possibility of overspending

Almost a third (30%) of users spent more than they would have spent if BNPL had not been available. Experts say BNPL can be a gateway to overspending for many consumers. In fact, nearly 70% of BNPL users admit to spending more than they would if they had to pay for everything upfront, Lending Tree reported.

4. Apple Pay Later and others

Apple Pay Later will join many other companies in the BNPL sector. Companies offering BNPL services include Affirm, Afterpay, PayPal, Sezzle, Zip and Klarna; various banks, payment processors and other businesses.

5. Government investigation

Concerned about the rapid growth of BNPL firms, in December 2021 the Consumer Financial Protection Bureau (CFPB) opened an investigation into BNPL. The bureau said it was concerned about consumers “accumulating debt, regulatory arbitrage and data collection in a consumer credit market that is already rapidly changing with technology.”

Photo by Kindel Media: https://www.pexels.com/photo/a-woman-shopping-online-using-a-laptop-7007176/