When food prices are already straining budgets, paying for basics over time can seem like a practical stopgap. But researchers say that convenience may also help drive up costs for other shoppers.
According to Fortune, a study from Washington University in St. Louis found that as more people use buy now, pay later services for groceries, stores may react by raising prices and stocking less inventory.
Here's what to know
To understand why retailers would accept buy now, pay later transactions despite the merchant fees involved, researchers built an economic model, Fortune reported. They found that stores may offset those costs by raising sticker prices.
Panos Kouvelis, a professor of supply chain, operations, and technology at WashU's Olin Business School, led the study, which is set to appear in Management Science.
In a July LendingTree survey of more than 6,000 consumers in the United States, Fortune stated that 29% of respondents said they had used buy now, pay later loans for groceries. That's over double the amount of people who were using them in 2024.
About 91.5 million Americans use apps like Klarna, Affirm, and Afterpay to finance purchases. The Federal Reserve Bank of Richmond said use of those apps climbed 20% between 2021 and 2025, but they still make up only about 1% of credit card transactions.
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More background
Buy now, pay later services were initially aimed at larger nonessential purchases like furniture or gaming consoles. Those categories usually carry richer margins, giving retailers more room to absorb the fees tied to installment-payment services.
Groceries are a different story.
Because food staples sell at much thinner margins, even a small extra cost can put pressure on stores. Kouvelis told Fortune that retailers may remove items from shelves if they no longer make financial sense, leaving shoppers with fewer choices.
These buy now, pay later companies operate in a fintech sector with limited regulation, and historically they have not reported this debt to credit agencies. LendingTree found that 47% of users had been late repaying a loan despite the average debt being about $135.
What can be done?
The findings come as payment platforms marketed as flexible options face increasing judgment over the risks they can create for both shoppers and retailers.
Where can I learn more?
Seemingly minor retail decisions can ripple outward in many ways, especially for shoppers already stretched thin.
• 56% of U.S. consumers say grocery shrinkflation made them quit certain brands
• In Florida, grocery bills are pushing more families into credit card debt.
• Consumers are investigating packaging claims in online orders as greenwashing concerns spread.
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