One in five buy-now-pay-later users misses at least one repayment a year. Half already carry maxed-out credit cards. The easy conclusion is that people are spending beyond their means. The more accurate one is that the product is designed around a cognitive gap — and nobody’s closing it.
The purchase feels nothing like the payment
When you split a $160 purchase into four fortnightly instalments of $40, your brain registers the product as real and the payments as abstract. Small. Manageable. Far away. This is present bias — the very human tendency to overweight what’s in front of us and underweight what’s coming. BNPL products are built around this instinct. The frictionless checkout, the instant gratification, the four tidy numbers that seem easy to absorb.
The trouble is that present bias doesn’t switch off when the due dates arrive. Each repayment becomes its own decision episode — one competing with rent, groceries, and every other financial obligation that fortnight. The intention formed at checkout doesn’t automatically become action at repayment. The emotional connection to the original purchase has already faded. What remains is a series of small financial losses with no corresponding pleasure attached.
When money feels tight, thinking narrows
For users already carrying financial stress, something else compounds the problem. Research on scarcity shows that when resources feel limited — not just money, but mental energy — people tunnel. They focus on the most immediate pressure and filter out everything else. Bills don’t get missed through irresponsibility. They get missed because cognitive capacity genuinely reduces under financial strain.
This reframes the missed payment problem entirely. It’s less often “I don’t have the money” and more often “I couldn’t hold all of this in my head at once.” The payment didn’t feel urgent enough to win the competition for attention.
The late fee that doesn’t actually deter
The standard BNPL late fee — typically flat and modest — is almost perfectly designed not to work as a deterrent.
Under prospect theory, losses feel larger than equivalent gains — but only when they cross a psychological threshold. A flat $10 fee on a $40 instalment is a 25% penalty in real terms. But it doesn’t land that way, because the pleasure of the purchase was already banked weeks ago, and the fee arrives later, detached, and spread across time. The pain is dull. The deterrence evaporates.
What follows is a fee that functions more as an accepted cost than a genuine consequence. Once a consumer learns that missing a payment costs $10 and nothing catastrophic, the commitment mechanism stops working entirely. The product promised structure. It delivered a very affordable way around it.
What would actually help
The answer isn’t tightening access or blaming consumers for predictable behaviour. It’s redesigning the information environment around how people actually make decisions under pressure.
Show the real cost, not the flat number. A $10 late fee sounds minor. But on a $40 instalment, it’s a 25% penalty. On a $25 instalment, it’s 40%. Displaying the fee as a percentage of the missed payment — not just a dollar figure — changes what the consumer actually perceives. Research on cost transparency in credit products consistently shows that proportional framing shifts attention in ways flat numbers don’t. The fee doesn’t need to change. The way it’s shown does.
None of this requires regulatory overhaul or a product rebuild. It’s a small, evidence-based adjustment that works with how people think rather than assuming consumers will overcome their own cognitive patterns through willpower alone.
The gap between intention and action in BNPL is entirely predictable. That means it’s also entirely preventable. The question is whether the industry has the appetite to close it before regulators decide to do it for them.
References: Laibson (1997); Kahneman & Tversky (1979); Mani et al. (2013); Prelec & Loewenstein (1998); Thaler (1985)
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