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The 'buy now, pay later' bubble is about to burst

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Re: The 'buy now, pay later' bubble is about to burst

#121

Post by wyuenho »

dusted wrote: post #3

I don't get it.. There's a childrens song in Denmark, it's lyrics go, roughly translated "and if you have money, then you can have, but have you none, then you may go!" (it's about buying bread at the bakery).. When I see how people spend money they don't have, I'm always wondering if their parents never sang for them when they were young, or if they are of a particular dim nature. Sure, I can see why some people wou…

Just because you are financing, doesn’t mean you are buying things with money you don’t have, only financially illiterate people of a particularly dim nature would say that.

There are plenty of reasons to delay paying for things as much as possible, especially if the financing has zero cost. Say you bought a new £800 stand mixer on Black Friday. Splitting the costs in 3 allows you to deploy the funds elsewhere, such as investing in an index fund, buying bonds or put into a CD account or anything productive to offset some of the cost or if you are lucky, cover it. A dollar today is not the same as a dollar tomorrow.

Another common reason for that is to stretch your credit limit without affecting your credit score. Say your credit card has a £30k credit limit. There is an expensive 4-5 figure gift you want to buy for your girlfriend for Christmas or take an expensive holiday to some exotic location. You can afford it, but it’s going to cost a few months’ salary and a dip in your credit score. You can pay for your purchase with BNPL without leaving you nothing at the end of the next few months and have no impact on your credit score.

BNPL is a great financial buffer for everyone, as long as you have some baseline discipline to pay off what you owe.

Re: The 'buy now, pay later' bubble is about to burst

#122

Post by mountainriver »

onlyrealcuzzo wrote: post #89
sbuccini wrote: post #71

I posted this before, will post again: This article is so weak. It doesn't provide any actual reasons for why BNPL is a bubble nor why such a supposed bubble is about to burst. Seriously quotes TikTokers who are probably just paid shills for the company. There are real issues with BNPL, mostly extremely loose underwriting in the pursuit of growth, but realistically it's functionally no different than a credit card. P…

> realistically it's functionally no different than a credit card. > There are real issues with BNPL, mostly extremely loose underwriting in the pursuit of growth. It's a cc with bad underwriting... You don't see this as a fundamental problem? This doesn't seem much different to me than other sub-prime bubbles...

I’ve worked in this industry and the underwriting is actually significantly better than most cc companies

Re: The 'buy now, pay later' bubble is about to burst

#123

Post by mountainriver »

CyanLite2 wrote: post #111
sbuccini wrote: post #71

I posted this before, will post again: This article is so weak. It doesn't provide any actual reasons for why BNPL is a bubble nor why such a supposed bubble is about to burst. Seriously quotes TikTokers who are probably just paid shills for the company. There are real issues with BNPL, mostly extremely loose underwriting in the pursuit of growth, but realistically it's functionally no different than a credit card. P…

BNPL is just a non-asset-backed sub-prime loan. We've seen this movie before and how it ends. BNPL firms can't survive a recession or higher consumer delinquencies.

Funny credit cards survive when it’s the same thing

Re: The 'buy now, pay later' bubble is about to burst

#124

Post by cfel »

crote wrote: post #4
senttoschool wrote: post #2

“We found that most of the people that use buy now, pay later either don’t have or don’t use a credit card,” Marco Di Maggio, an economist at Harvard, told me. He said that Gen Z was skeptical of credit cards, possibly because many of them had seen their parents sink into debt. This is always weird to me. It makes sense why Gen Z does this. But weird. I can get 2-4% back on all my purchases using my credit card, incl…

Don't forget that there is no such thing as a free lunch, though. Credit card companies aren't charities! In general all those perks are paid for by rather significant credit card processing fees, which you pay for yourself via increased product prices. Furthermore, their goal is to normalize the use of credit cards, in the hope that you'll eventually stumble and get screwed over by the interest fees. Also, I think y…

Gen Z starts in 1997.

Re: The 'buy now, pay later' bubble is about to burst

#125

Post by mountainriver »

mrjin wrote: post #54
MarkusWandel wrote: post #8

"BNPL providers can offer zero-percent interest rates because they charge merchants three to four times the average credit-card processing fee." Right. And the vendor can't charge a higher price to the BNPL crowd, so they average it out over everyone. And thus the BNPL app user gets an "interest free" microloan, with everyone, even the people paying cash, having to pony up for the interest. Just like credit cards wit…

Even that was not quite right. Just take a look at those leading providers' financial reports, none would be pretty. They were virtually accumulating customers by providing heavy incentives using investors' money so that they could bump up the share price to allow early investors to exit. Making a profit was not even their secondary priorty.

Yup klarna is notorious for this, up to 100m dollar bribes!

Re: The 'buy now, pay later' bubble is about to burst

#126

Post by _huayra_ »

_fat_santa wrote: post #93
ceejayoz wrote: post #76

Earlier quoted context omitted.

> It doesn't provide any actual reasons for why BNPL is a bubble nor why such a supposed bubble is about to burst. I'll provide one: it only made any significant sense in the near-zero interest rate levels we had last year. "Split it into four payments for $0 fee" is attractive. Much less so when there's a fee; Amazon's BNPL via Affirm is now up to 10-30% APR from the previous 0%. At those rates, people just put it o…

I see BNPL companies as having two types of customers: those that can't afford the full price and want to pay over time, those that read the terms closely and realized the deal is too good not to take. I took out a number of BNPL loans last year and it was never because I couldn't pay the full price but rather if I was getting the money at 0%, "free money". But I was never the target customer of these places, I was j…

Maybe I just haven't had the opportunity to buy any big ticket items with BNPL, but the few times I tried it (trying to do the "free money" thing, getting a bit more interest in my HYSA by amortizing the total payment out over time), it just created kind of a financial tracking nightmare. I'd get flurries of emails about how my "pay in 4" payment was about to process....for $13. Trying to keep track of all that for a few pennies became too difficult (matching up which purchase each micropayment was from), although those pennies add up for larger purchases indeed!

But for a floor rate of 10%, BNPL is just a less terrible credit card, not a good deal :(

Re: The 'buy now, pay later' bubble is about to burst

#127

Post by Existenceblinks »

[slightly-off-topic] Inb4: discipline, you're holding it wrong blah blah. I'm not in the country where credit score sounds like a moral, but my middle class friends already adopt this mindset .. now I'm not fun at party, it's sick! "use credit like it is debit" .. okay what's the point then.

Re: The 'buy now, pay later' bubble is about to burst

#128

Post by Gordonjcp »

_fat_santa wrote: post #93
ceejayoz wrote: post #76

Earlier quoted context omitted.

> It doesn't provide any actual reasons for why BNPL is a bubble nor why such a supposed bubble is about to burst. I'll provide one: it only made any significant sense in the near-zero interest rate levels we had last year. "Split it into four payments for $0 fee" is attractive. Much less so when there's a fee; Amazon's BNPL via Affirm is now up to 10-30% APR from the previous 0%. At those rates, people just put it o…

I see BNPL companies as having two types of customers: those that can't afford the full price and want to pay over time, those that read the terms closely and realized the deal is too good not to take. I took out a number of BNPL loans last year and it was never because I couldn't pay the full price but rather if I was getting the money at 0%, "free money". But I was never the target customer of these places, I was j…

Similarly I've used BNPL products to buy things like car tyres because they don't cost me anything (well - okay, the cost is borne by the seller, so presumably they bump the prices up a bit across the board, but you know what I mean), not because I didn't have the money. Generally it was things like "half now half next month".

The thing is, doing stuff like that - taking on debt and paying it - builds up your credit score. My credit score was awful after some youthful indiscretions with bank loans and credit cards, but after borrowing (and paying back) a total of about ten grand over as many years I've got a credit rating like a Swiss bank.

Re: The 'buy now, pay later' bubble is about to burst

#129

Post by KptMarchewa »

dusted wrote: post #61
Ultimatt wrote: post #35

Earlier quoted context omitted.

Or you can afford the camera outright, right now. What's better out of these options: 1) Buy for cash the camera now. You don't have any cash in hand afterwards, and the camera is depreciating in value immediately as an asset only offset by whatever you do with it. 2) Buy via BNPL with no interest for 12 months, and pay exactly a 12th a month. You have the camera, but you also have 91% of your cash in the bank that /…

I disagree, it's death by a thousand paper-cuts. Having my funds reduced to 91% the rest of the year is waaay worse for me, than having it reduced to ~0% the rest of the month. Because, the rest of that month, I'll be super-vigilant, I'll be acutely aware of why I have less money than normally, I know not to make anymore purchases, I know that this month is not for an extra treat, because I bought the other thing. Ne…

So the weakness is your psychology not the business model.

Re: The 'buy now, pay later' bubble is about to burst

#130

Post by nkrisc »

strken wrote: post #30
senttoschool wrote: post #2

“We found that most of the people that use buy now, pay later either don’t have or don’t use a credit card,” Marco Di Maggio, an economist at Harvard, told me. He said that Gen Z was skeptical of credit cards, possibly because many of them had seen their parents sink into debt. This is always weird to me. It makes sense why Gen Z does this. But weird. I can get 2-4% back on all my purchases using my credit card, incl…

It's a hateful little piece of plastic. You carry it around in exchange for 2-4% cashback and fraud protection that should by rights apply to debit cards too, and the credit card company sits there hoping you give in to temptation and actually use the line of credit it represents, at which point they charge you usurious rates and distribute part of their loot to all the other poor schmucks they're conning. I have one…

> and the credit card company sits there hoping you give in to temptation and actually use the line of credit it represents, at which point they charge you usurious rates and distribute part of their loot to all the other poor schmucks they're conning.

It is kind of grim when I stop to think about how the probably several thousand dollars in cash-back bonuses I've received over the years of never paying a single cent of interest on my credit cards is probably subsidized by the people who do fall into this.

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