The way a product is labelled can change how consumers think about it. “No added sugar” or “99% fat free” can make food sound healthier than it really is.

The same might apply to buy now, pay later schemes. Marketed as a convenient way to pay for purchases over time, they are fundamentally still a form of debt.

Products such as Afterpay, Klarna and Zip (which recently exited the New Zealand market) offer consumers access to items they may not be able to immediately afford.

Speedy approval and an easy checkout add to the appeal, but can also encourage overspending, while missed payments can bring late fees and mounting debt.

Part of the product’s attraction, particularly among younger consumers wary of credit cards, has been the idea that it is different from conventional borrowing.

Our new research set out to interrogate this further: if it feels more like a normal payment, does that affect how people use buy now, pay later? And might better financial literacy protect them?

Buy now, pay later emerged in the early 2010s and quickly became commonplace in New Zealand. It can now be used for everything from fast fashion and takeaway food to dental treatment.

Typically, consumers borrow relatively small amounts and repay them over four fortnightly instalments, without interest or establishment fees. Providers charge vendors a small percentage (2% to 8%) on each sale, but also earn substantial revenue from late fees charged to consumers.

Approval has........

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