The Impact of Buy Now Pay Later on the Financial Vulnerability of Young Households in Indonesia
Keywords:
Digital consumer credit, Household resilience, Financial fragility, Propensity score matching, Income instability, Debt managementAbstract
Purpose - This study estimates the effect of Buy Now Pay Later (BNPL) use on the financial vulnerability of young households in Indonesia and examines whether the effect differs by income stability and financial literacy.
Methodology - The quantitative cross-sectional analysis used 824 household observations. Propensity scores were estimated from pre-treatment demographic, economic, financial capability, prior-debt, and digital-behavior covariates. One-to-one nearest-neighbor matching with a 0.20 caliper produced 301 matched pairs. The analysis estimated the Average Treatment Effect on the Treated and conducted subgroup, alternative-estimator, and hidden-bias sensitivity tests.
Findings - In the illustrative simulated dataset, matched BNPL users recorded a Financial Vulnerability Index 0.310 standard deviation units higher than comparable nonusers. BNPL use also increased objective vulnerability by 0.390 points and subjective vulnerability by 0.270 points. The effect was stronger among households with unstable income and lower financial literacy. All three hypotheses were supported, and alternative estimates remained between 0.270 and 0.340.
Implications - Regulators and providers should evaluate cumulative installment exposure, income volatility, emergency savings, and practical debt-management capacity rather than relying only on repayment default.
Originality – The study advances BNPL research by shifting the outcome from individual purchasing behavior to household financial resilience and by applying a matched counterfactual design in the Indonesian context.
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