Bank for International Settlements working paper finds credit reporting for BNPL cut usage by 14% and reduced defaults

The Bank for International Settlements published a working paper assessing how mandatory credit reporting changes consumer use of buy now, pay later (BNPL) credit, using China’s 2021 incorporation of Ant Group’s Huabei BNPL accounts into the People’s Bank of China’s centralised credit registry. It finds BNPL borrowing falls materially once usage is subject to credit reporting, with larger reductions among higher-risk borrowers and improved repayment outcomes. Using user-level data on 200,000 Huabei customers from a large digital platform and exploiting the September 2021 shift to credit reporting, the paper estimates average BNPL payments decline by 14% relative to the pre-policy period, with both fewer users paying via BNPL and lower BNPL amounts when used. The share of Huabei payments in total consumption falls by 7 percentage points, while credit and debit card payment shares rise by 2 and 4 percentage points respectively, and results show no meaningful reduction in BNPL credit lines, suggesting the effect is demand-driven. Difference-in-differences results show users with prior BNPL defaults reduce BNPL usage more (including an additional 24.2% fall in BNPL payment amounts) and experience larger reductions in default rates, while their online consumption declines by 5%. The paper also reports shifts in new BNPL adoption after the policy change, with post-policy adopters being older, taking longer to adopt BNPL and showing smaller initial BNPL payments and lower default incidence. Survey evidence from the platform aligns with the behavioural results, with concerns about negative impacts on credit records ranking among the top reasons for not using BNPL and responses varying by prior default history and financial literacy.