Americans are continuing their post-pandemic online spending spree in 2024, despite the pain of stubborn inflation and interest rates at their highest levels in two decades. And one of the main reasons for this boom is that consumers are increasingly choosing to delay paying until later.
U.S. consumers spent $331.6 billion on online purchases in the first four months of 2024 alone, according to a study. report produced by Adobe Analyzes Thursday. That’s 7% more than a year ago and, more importantly, online spending was driven by new demand, not rising prices. Adobe researchers explained that e-commerce prices fell 5.6% in April compared to last year. This means that if their numbers had been adjusted for inflation, the percentage growth in Americans’ online spending would have been even higher.
“In an unpredictable economic environment, the latest data from Adobe Analytics shows continued resilience in the digital economy, as consumers embrace new categories online,” said Vivek Pandya, principal analyst at Adobe Digital Insights, in a press release, highlighting the sharp increase in sales of food products. a remarkable new category of spending.
But several new reports also indicate that many consumers, particularly low- and middle-income consumers, rely on credit card And Buy now, pay later (BNPL) platforms to maintain their lifestyle. A record $25.9 billion in e-commerce spending between January and April was driven by BNPL platforms, as shoppers “adopt more flexible ways to manage their budgets,” according to Adobe. This represents an 11.8% increase in BNPL spending compared to the same period a year ago.
Adobe also expects BNPL to generate up to $84.8 billion in consumer spending in 2024, about 13% more than last year. For reference, this means Americans are poised to spend more money using BNPL platforms in 2024 than in Panama. the entire economy managed to produce in 2023.
Low-income consumers, in particular, are relying on BNPL programs to maintain their spending as inflation continues to take hold. Nearly half of all households that used BNPL in March 2024 earned less than $50,000 a year, a study found. Bank of America Investment Institute study published on May 2. BofA researchers found that the share of so-called “heavy” BNPL users – or those who make 20 or more BNPL payments per month – has also jumped 15% since 2019, although it still remains a small percentage of the Bank of America Total number of credit card users.
Some analysts have warned that the “phantom debt” that accompanies BNPL programs is an underappreciated problem for the economy, arguing that it masks the pain many middle- and low-income consumers feel due to inflation. BNPL debt has been characterized as ” ghost ” Wells Fargo senior economist Tim Quinlan, because BNPL platforms often refuse to share customer purchasing activity with credit bureaus, leaving economists and analysts in the dark about the total amount of BNPL debt in the system. However, Quinlan told CNBC As of Thursday, nearly a third of the current growth in U.S. credit card debt could be the result of BNPL platforms, according to its envelope calculation.
Many Americans have relied on credit cards to increase their purchasing power in recent years. Credit card debt hit a record high of $1.13 trillion in the fourth quarter of 2023, according to the Federal Reserve Bank of New York. At the same time, credit card delinquency rates doubled from 1.5% in the third quarter of 2021 to 3.1% in the fourth quarter of last year. This rate remains well below the delinquency rate of more than 6.7% seen after the Great Recession of 2009, but it is an unhealthy trend.
Nonetheless, the good news is that while BNPL platforms increase credit card debt levels and could pose a risk to individual consumers, BNPL payments still represent a small share of overall credit card balances, according to BofA, which “probably limits overall risk.” to consumers and the economy as a whole.
