Social media addiction fuels buy now, pay later debt, says study

Using social media has been found to be a significant indicator of whether someone will go on to use a buy now, pay later (BNPL) services such as Klarna, PayPal, or formerly Apple Pay Later. A study surveyed 354 second-year university students at four private universities in Jakarta, Indonesia and found that the more people use social media, especially students, the more likely they are to see BNPL ads and utilise those services.

The findings of the study found that good financial parenting reduced students’ intention to go into debt via buy now, pay later services. However, even these parental influences were somewhat eroded if respondents spent a lot of time on social media being exposed to BNPL products and services.

While ads from BNPL companies are a factor, they’re not the only things that drove students to go take on debt. The study also found that if users see their friends using these services through social media, this can also make BNPL seem more acceptable.

While the revelation that increased social media use even erodes good financial parenting is a bit disheartening, the study still encourages parents to speak to their kids about financial planning and the responsible use of BNPL. It also recommended that universities inform students about the downsides of BNPL, like interest rates and the long-term consequences of mismanaged debt. The final measure it suggested was that financial regulators should implement regulations around BNPL, especially for people on fixed incomes, to avoid defaults.

If you’re not familiar with buy now, pay later, providers essentially pay for your purchases, and then the buyer has to pay back the full amount in installments over several months. As long as you pay on time, you just pay back what the item costs, but if payments are missed, this is when BNPL companies start charging late fees, and persistently delinquent accounts can be sold off to debt collection agencies.

The relative newness of these services means customers are less protected financially compared to other financial products that let you borrow money. If you want to avoid problems around buy now, pay later, then it's probably best to save now, buy later.

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