Buy Now Pay Later Services, Marketed as Better Alternatives to Credit Cards, Leave Many With Regret

New forms of cheap credit enticed many consumers to overextend their finances. Now as the bills come due, many are left asking, "Is instant gratification worth the price?"

NEW YORK, Oct. 06, 2022 (GLOBE NEWSWIRE) -- Carrot, the leading shopping app for visual product bookmarking with a mission to bring joy to online shopping, issued a response to recent Consumer Financial Protection Bureau warnings about the significant risks to consumers posed by "Buy Now, Pay Later" (BNPL) services.

"The current cycle of spendthrift behavior is coming to an end," says Nick Kuzma, head of growth at Carrot. "Not only are consumers missing payments, but our data also shows shop browsing—a key intent signal for purchases—is down ~15% in recent months, with actual purchases lagging even further. For consumers to delay or defer a purchase is one thing. For them to avoid browsing altogether is a clear reflection of a change in consumer psychology and sentiment toward spending."

BNPL companies rose to prominence during the coronavirus pandemic, fueling a glut of online spending, particularly for high-cost items like home furnishings and home gyms. Over 40% of Americans were at some point persuaded by marketing that promised an antidote to the pitfalls of traditional credit cards. But now 18% of Americans, nearly one in five, have missed a payment, incurring late fees and, for many, damaging their FICO credit scores. Missed payments and reduced spending are natural parts of the long-term debt cycle in every economy, but the recent entry of BNPL services into the market has exaggerated consumers' ability to borrow against future earnings in a way not previously seen.

"The bulk of e-commerce has become fast food, designed to trigger cravings and feel good in the moment, but ultimately leaves you with regret," says Bobby Ghoshal, serial startup founder and CEO of Carrot. "It's a symptom of a greater malady—the inability to stay top of mind, connecting authentically with customers and building relationships. Instead of addressing the root cause, brands have understandably focused on removing friction; optimizing for FOMO, cheap credit, one-click checkout, discounts, and 'buy-right-this-second' messages; because they know that if a prospective customer leaves their website without converting, they're unlikely to ever see them again. BNPL takes this to an extreme, giving folks the ability to supersize their purchases, ultimately leaving them in worse shape and with even greater regret."

Now, as the economy tilts towards a recession, consumers have responded by directing a greater share of spending to big box retailers like Amazon, which in September commanded a 16% greater share of transaction volume in online spending compared with the same month last year, according to Carrot data. The bulk of this growth is the result of a reduction in spend across other retailers, especially smaller independent merchants, more so than growth of Amazon directly. These smaller merchants now have to make spend reduction decisions of their own, a contributing factor towards a wider economic contraction.

Against this backdrop, Carrot's internal research shows that what consumers desire most is not "instant gratification" but "increased gratification," reports Bobby Ghoshal. The same research suggests that consumers who consider their purchases for longer and evaluate a range of options report higher degrees of satisfaction than those who purchased items on impulse using buy now, pay later services.

"Carrot was designed to let consumers enjoy being power shoppers without the pressure of being immediate power buyers," says Louis Kearns, Head of Product at Carrot. "Users get the dopamine rush of adding products to cart, with the benefit of the time and space they need to feel good about a product they might want to buy. The peace of mind knowing they can always find all those products inside their Carrot is a natural extension of the shopping experience consumers now expect. Carrot lets consumers shop with confidence, on their own terms."

Consumers have responded enthusiastically to this alternative focus on intentionality, making Carrot a top mobile Safari extension in the Apple App Store. Items saved by users are added to their accounts where they can be easily accessed across devices, organized into collections, and shared with others.

"The most remarkable thing has been seeing how users apply the tools we've built to their shopping journeys," says Ramin Bozorgzadeh, co-founder and CTO at Carrot. "The more consideration involved in the purchase—whether that's because it's an expensive purchase, one with many comparable options, or a very visible purchase like a gift—the more they turn to Carrot to visualize their options and make the decisions with confidence."

Carrot plans to continue expanding its consumer offerings, bringing greater intention and satisfaction to online shopping. "The purchase journey doesn't have to end in regret—we can address the root cause of the current issues in e-commerce and, in doing so, support consumers and merchants, especially smaller independent brands who don't possess Amazon-sized marketing budgets. Our number one focus will continue to be bringing increased gratification to our users—that joy you feel when you buy a product you love from a brand you believe in," says Bobby Ghoshal. "We're excited to bring several new products to market in the coming months, the likes of which have never been seen before, helping consumers to find inspiring products from the best brands, and empowering brands to connect with their most loyal shoppers."

Contact Information:
Nick Kuzma
Head of Growth, Carrot
(503) 327-6957

Bobby Ghoshal
CEO & Co-Founder, Carrot

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