FICO is launching new credit scores that will incorporate buy-now-pay-later (BNPL) loans, influencing consumer and merchant behaviors. This change could affect ecommerce metrics like conversion rates and average order values, as consumers reassess their use of BNPL services. Some BNPL providers report repayment data, but these FICO models are the first standardized effort to include BNPL in credit scoring. The decision responds to lenders' needs for better repayment visibility, especially for consumers with multiple loans posing higher risks. Merchants could experience uncertainty at checkout due to these changes.
FICO's decision to include BNPL data addresses lender demand for better visibility into repayment behavior and the widespread use of BNPL loans.
For FICO's primary customers (financial institutions), consumers who take out multiple BNPL loans are a higher risk.
Critics argue that traditional scoring models, such as FICO's, do not reflect the realities of modern consumer finance.
Concerns about BNPL plans potentially feeling more like formal loans could lead to a measurable shift in consumer behavior.
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