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

theatlantic.com

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

#131

Post by clintonb »

jacobsimon wrote: post #116
sbuccini wrote: post #86

Earlier quoted context omitted.

Your claims are not true for several reasons: - Whenever you see a BNPL offer for 0% it means the merchant is paying the interest on behalf of the consumer. The merchants are in charge of making that decision, not Affirm. Affirm earns interest on every loan. Many merchants choose to assume that cost because it greatly increases conversion rates. Replies to my comment only confirm this fact (“I only ever used BNPL cau…

> Whenever you see a BNPL offer for 0% it means the merchant is paying the interest on behalf of the consumer. I don’t think this is true - the merchant pays a transaction fee (around 3-5%) with companies like Affirm or Klarna, which is not much different than typical credit card fees. The merchant is not paying an interest rate or liable to pay more if the customer fails to pay on time.

You’re on the right track, but have the wrong specifics.

A merchant accepting card payments might pay “sticker rate” for processing, 3%, at the outset; but, they eventually get IC+ pricing as their volume increases. This might be closer to 1-2%.

If they pay 5% to a BNPL, that extra 2-4% is meant to cover the interest of the “loan” if the customer doesn’t pay back on schedule.

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

#132

Post by sbuccini »

jacobsimon wrote: post #116
sbuccini wrote: post #86

Earlier quoted context omitted.

Your claims are not true for several reasons: - Whenever you see a BNPL offer for 0% it means the merchant is paying the interest on behalf of the consumer. The merchants are in charge of making that decision, not Affirm. Affirm earns interest on every loan. Many merchants choose to assume that cost because it greatly increases conversion rates. Replies to my comment only confirm this fact (“I only ever used BNPL cau…

> Whenever you see a BNPL offer for 0% it means the merchant is paying the interest on behalf of the consumer. I don’t think this is true - the merchant pays a transaction fee (around 3-5%) with companies like Affirm or Klarna, which is not much different than typical credit card fees. The merchant is not paying an interest rate or liable to pay more if the customer fails to pay on time.

I am 1000% correct. Go look at Affirm’s Q1 2023 earnings supplement, slide 14.

Average MDR is actually closer to 5-7%, 0% is closer to 12.5%

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

#133

Post by danaris »

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…

Ah, so now we've finally moved on from "Millennials are children" to "Gen Z are children". While it may still be true of some of them (I'm not sure exactly what the accepted bounds of "Gen Z" are these days), many are full-grown adults in their 20s with full-time jobs.

And many of those full-grown adults in their 20s with full-time jobs still can't afford to even rent a place without multiple roommates to share the cost with.

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

#134

Post by Existenceblinks »

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…

You sound like me, a friend who's not fun at objects party. All my friends told me I hold my debit card wrong, should get a nice promo credit card and spend like there's no tomorrow. All discipline they told me just eliminate 97% of the point of credit. "Someone else money" is the only appealing because the someone will take care of a lot of hustle for us.

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

#135

Post by buescher »

mschuster91 wrote: post #24
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…

> "But old cars break down and are expensive to get repaired" Yes, but you don't have money to pay someone else to repair it, old cars have cheap parts and are relatively simpler to repair, learn how to do it, you're not in a position to be fussy about what skills are beneath you if you can't pay someone else to do it, stop thinking so highly of yourself and get to it! You're ignoring the "boots theory" [1]. A new or…

The boots theory does not really hold for mass produced items, including boots. A usable pair of cheaply made boots costs less than resoling a good pair of boots. I propose the Buzz Bissinger boots theory: Buzz is not rich because he buys fancy boots, Buzz buys fancy boots because he inherited a lot of money. https://www.gq.com/story/buzz-bissinger-shopaholic-gucci-add...

The sweet spot in TCO for cars is generally (look at Edmunds numbers) a new compact in base trim. TCO will go up with a more expensive or "higher quality" car. If you are in the position between choosing to finance a new compact at low/reasonable interest rates or pay outright for a beater, the new car will be the better deal. A used compact is actually an OK compromise if you don't have money up front or want lower payments - a 5-year-old Corolla has slightly higher TCO than a new one, but not by that much.

Being able to pay on time for a compact car requires some basic financial stability but that's not "rich".

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

#137

Post by christkv »

Repackaging BNPL loans into financial instruments (reminds me of 2008) will make it even worse when this house of cards collapses.

When credit is not priced to risk is when we get distortions that lead to systemic risk as the fall of a single entity like

Since companies that repackage debt and sell it off for suckers to buy there is 0% interest in doing proper credit checks. They just want to generate as much business as they can to make their return on selling the crap to other suckers.

It's 2008 all over again but with consumer credit this time instead of mortgages.

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

#138

Post by pessimizer »

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…

> If you don't have money for fast-food, then go to the grocery store and buy the ingredients yourself

If you're talking about the US, if you're poor the nearest grocery store will be miles away, dirty, and the prices will be a 50% markup over what people pay in nice neighborhoods. Also, McDonald's will sell you an entire meal for $3 and is down the street.

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

#139

Post by Existenceblinks »

matwood wrote: post #81
Vespasian wrote: post #37

Earlier quoted context omitted.

There is nothing inherently wrong with that but it's a lot more risky then saving up. Say after 10 months an unavoidable bill of $4k shows up and I got to pay it. If I'm saving up I can redirect that money. It sucks that I don't get the camera when I planned to but otherwise I'm fine. Under a BNPL plan I have no extra money to allocate and might have to dip into Credit (potentially with high interest). In short: Savi…

> There is nothing inherently wrong with that but it's a lot more risky then saving up. Cash is king. Assuming 0% interest, it's financially better and less risky to do BNPL. This is separate from all the other financial decisions like savings, etc... It's similar with CCs. I love my CCs and get a ton of value and free stuff by using them. I also have never carried a CC balance in 20+ years. Someone who is financiall…

Why punish normies who have the same discipline with more expensive stuff?

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

#140

Post by phphphphp »

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…

Functionally it is substantially different to a credit card. The value of BNPL to businesses is the way that it changes the basis for a customer’s purchase decision, a credit card does not have that same dynamic.

The underlying credit mechanism might be a lot like a credit card but the way borrowers interact with it, which is what matters, is very different. The mechanics of a mortgage and a car loan are very similar but that doesn’t make a mortgage a car loan and vice versa.

BNPL is a bubble. BNPL is just like ride-sharing circa 2016, as soon as cheap money stops and regulation arrives, the bottom falls out and people realise that BNPL is just new paint on an old idea and should be valued as such.

BNPL will not die because it has existed for decades, and it is a valuable service to a subset of consumers but when you set aside all of the tech-boom hype… it’s just a boring financial service with healthy-but-unremarkable profit opportunities.

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