Offering "buy now, pay later" financing can lead retailers to charge higher sticker prices and, under some conditions, carry less inventory, according to new research from Washington University in St. Louis.

The finding is not a newly announced price increase from a particular retailer. There is no single percentage increase, previous price or effective date. Instead, the researchers modeled how access to installment financing can change a retailer's pricing and inventory decisions.

The study, "Buy Now, Pay Later: The Hidden Effects of Consumer Liquidity on Retail Prices and Inventories," was written by Naveed Chehrazi, Panos Kouvelis and Wenhui Zhao and is forthcoming in Management Science, according to Washington University.

Why BNPL can push the sticker price higher

Buy now, pay later providers typically pay a retailer upfront and then collect installment payments from the customer. In return, the financing company takes a portion of the transaction.

That financing cost changes the economics of the sale. In the researchers' model, retailers can respond by setting a higher sticker price to recover part of the cost of accepting BNPL.

The effect does not necessarily stop with customers who choose installments. When a retailer charges the same listed price regardless of payment method, shoppers who pay upfront can also face the higher sticker price. Washington University describes this as cash-paying customers potentially subsidizing customers who use pay-later financing.

A higher sticker price also does not guarantee higher retailer profit. After the financing provider takes its portion, the effective amount the retailer keeps from a BNPL-funded sale can be lower.

More potential customers can still mean less inventory

BNPL can help people complete purchases when they value a product but do not have enough available cash to pay the full price immediately. That can expand the pool of customers able to buy.

The study nevertheless found that accepting BNPL could lead retailers to carry less inventory in some modeled situations.

Across millions of simulated scenarios, the researchers found that when the retailer keeps less from a financed sale, the cost of missing a potential sale can also become smaller. That can reduce the incentive to hold additional stock even when financing increases the number of consumers able to make a purchase.

The researchers also found no simulated scenario in which adding BNPL turned an otherwise unprofitable product into a profitable one.

That result reinforces one of the study's central distinctions: generating additional sales does not necessarily mean that a retailer earns additional profit.

Who can feel the pricing effect

The study does not identify a named retailer or product whose price will rise by a fixed amount. Its conclusions come from a model involving a retailer, cash-constrained and price-sensitive consumers, and a financial-technology company providing installment financing.

The practical implication is broader. Where a retailer responds to BNPL costs by changing a common sticker price, both customers using installments and customers paying immediately can be affected.

The researchers also stress that BNPL can solve a genuine liquidity problem. A shopper may be willing to pay a product's full price but temporarily lack enough cash to make the entire payment at checkout.

Washington University says the arrangement can benefit retailers and consumers, particularly for larger discretionary purchases. The trade-offs become more significant as installment financing spreads to necessities such as groceries, bills and other routine expenses.

The research does not predict a universal BNPL price increase

BNPL has grown rapidly enough for its wider effects to attract increasing attention. A February 2026 analysis from the Federal Reserve Bank of Richmond estimated total U.S. BNPL transaction value at roughly $70 billion in 2025, equivalent to about 1.1% of total credit-card spending.

That $70 billion figure is an estimate rather than a finalized count of every BNPL transaction. The Richmond Fed derived it by modeling post-2021 growth among major providers and scaling those volumes to estimate the wider market. Its analysis put real BNPL transaction growth at roughly 20% per year since 2021.

The Richmond Fed also found no clear evidence as of early 2026 that BNPL had produced elevated financial stress across the broader consumer-credit system, while noting that its effects on consumers can be mixed.

The Washington University study therefore should not be read as evidence that every retailer offering BNPL will raise prices by the same amount or cut inventory by a fixed percentage. The outcome depends on factors including financing costs, customer liquidity, demand and the economics of the product being sold.

Its main finding is more specific: a payment option that appears to affect only the shopper choosing installments can also change the retailer's optimal price and inventory decisions, potentially affecting customers who never use BNPL at all.