The Fair Issac Corporation, better known as FICO, is launching new credit scores that incorporate buy-now-pay-later loans, potentially influencing the behavior of consumers, providers, and merchants.
The shift could impact ecommerce conversion rates, average order values, and repeat purchases if consumers reconsider how they use BNPL services or become ineligible.
Some BNPL providers already report repayment data, but the new FICO score models represent the first standardized effort to incorporate BNPL loans into mainstream credit scoring.
For ecommerce merchants, the change could highlight a need to monitor how shoppers pay and may introduce uncertainty at checkout.
FICO’s new BNPL credit scoring could impact merchant revenue.
Why It Matters
FICO’s decision to include BNPL data addresses lender demand for better visibility into repayment behavior and the widespread use of BNPL loans.
Specifically, a joint FICO and Affirm study “confirmed that a unique consumer behavior associated with BNPL loans is the potential for a large number of these loans to be opened within a short period.”
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. The FICO score and similar ratings fail to consider new forms of financial behavior, including:
As a result, according to critics, traditional credit scoring models may penalize actions that aren’t inherently risky.
Negative Impact
One concern of merchants could be that BNPL plans will feel less like casual payment tools and more like formal loans. That perception, in turn, could lead to a measurable shift in consumer behavior.
For example, shoppers who used BNPL as a risk-free way to split payments may hesitate when those loans become visible to lenders. For some, the mere possibility of a credit impact could cause them to abandon the cart.
This concern is not unfounded. Imagine a conscientious shopper who pays for a credit monitoring service. The shopper has been using BNPL for convenience, but now, after buying a new couch online via Affirm, Afterpay, or Klarna, the change in debt load triggers a five-point decline in their FICO score.
A second merchant concern is related to the behavior cited by FICO: shoppers taking several BNPL loans in a short period. The new reporting could impact revenue. Klarna may not approve a BNPL loan for a new appliance the same day a shopper used Affirm to buy a new end table. The appliance merchant gets one less sale.
Positive Impact
The use of credit scores is widespread, and monitoring BNPL behavior could have positive impacts, too.
For example, BNPL loans can now help establish or improve credit profiles for consumers with thin or no credit history.
The aforementioned FICO and Affirm study suggested that shoppers with five or more BNPL loans would typically see their scores remain stable or increase under the new model.
A good BNPL repayment history could boost FICO scores and encourage responsible shoppers — particularly younger adults or new credit users — to continue buying via BNPL, especially for higher-ticket items.
Plus, improved BNPL reporting could result in lower merchant fees. Ecommerce businesses often pay more for BNPL transactions than for standard payment card checkouts. The change to how these loans impact credit scores might force BNPL providers to be relatively more competitive.
What to Do
Earth-shattering or not, FICO’s new scoring is a reminder for ecommerce merchants to understand how payment options and fees impact profits.
It’s as easy as monitoring a few key metrics, including:
- Conversion rates. How payment options impact conversions.
- AOV. What is the average order value for shoppers using BNPL vs. cards?
- Repeat sales. Does the BNPL impact returning buyers and customer long-term value?
- Returns. Is there a relationship between returns and the payment methods used?
- Checkouts. Does the BNPL checkout rate change after FICO’s new scores take effect?