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Burrito Now, Pay Later

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Re: Burrito Now, Pay Later

#151

Post by skybrian »

benlivengood wrote: post #75
skybrian wrote: post #60

When the interest is paid out of a store’s marketing expenses, it’s pretty ambiguous who specifically pays it, but the money ultimately comes from the store’s revenue. If it results in higher prices, the people who actually use “buy now pay later” aren’t going to be the only ones paying more, since they pay the same price as everyone else. The costs are spread across all customers. Depending on demographics, this cou…

Credit in general is an incredibly regressive tax; only the poorest end up paying much interest and it's a much larger fraction of their total cash flow. I can get between 2% and 4% cash back on all purchases on a credit card that I pay off monthly with a zero-fee ACH transfer, paying no interest or yearly fees. I literally take poorer or less financially secure people's money that they spend on credit card interest.…

Yes, regular credit cards work that way, but this is different.

In the “buy now, pay later” scheme, the person getting the loan doesn’t pay the interest, or at least no more than any other customer. They’re getting subsidized by other customers.

Re: Burrito Now, Pay Later

#152

Post by skybrian »

bcoates wrote: post #97
skybrian wrote: post #60

When the interest is paid out of a store’s marketing expenses, it’s pretty ambiguous who specifically pays it, but the money ultimately comes from the store’s revenue. If it results in higher prices, the people who actually use “buy now pay later” aren’t going to be the only ones paying more, since they pay the same price as everyone else. The costs are spread across all customers. Depending on demographics, this cou…

Calling it a tax is about as enlightening as calling government insurance programs "ponzi schemes". A tax is a deadweight loss in one sector that (hopefully) funds something else in a (hopefully) net-worthwhile way. Calling a facilitating cost like marketing or finance or customer support a "tax" is like calling the need to pay to clean the bathrooms at your business a "tax", if you squint and look at it from far awa…

Fair enough. My main point is that the interest expense is being paid collectively, not individually. The same could be said of all sorts of other things.

Re: Burrito Now, Pay Later

#153

Post by RainyDayTmrw »

A lot of financial schemes sound like they could be above-board on paper, but in practice degenerate out of control. Securitization is a classic here. It's not that securitization is inherently bad or wrong, but it creates a lot more surface area for incentive misalignment and outright abuse.

Consider the United States subprime mortgage crisis of 2008. I'm actually willing to accept that broadening the borrower base had the potential to be a social good. In particular, throughout the 1990s and 2000s, home equity was a very real way for middle-class Americans to accumulate family wealth, and expanding access to that at least had potential for positive impact. But the actual way that the mortgage industry went about it was maximally wrong. Every layer was incentivized to finagle the numbers to work out, despite that the fundamentals never did. Every layer, from the loan officers to the underwriters, all the way on up, were incentivized to look the other way while they took their own cut. Loan officers fudged numbers, underwriters fudged numbers, and so on. At the core of this conflux was the mortgage-backed securities (MBS) machine. A lot of the financial engineering involved may have been valid on paper, with some set of constants. But it was clear, at least in hindsight, that the banks, ratings agencies, and brokers worked together to stack too many bad assumptions on top of each other, until the whole thing burst. We all know how that story ended.

Is BNPL, and the securitization thereof, the next big trap? It's too early to say with confidence, but certainly the signs are there. I only hope that, if it's going to blow up, it does so early, before regular people's pensions start buying into BNPL-derived securities.

Re: Burrito Now, Pay Later

#154

Post by rtpg »

fennecbutt wrote: post #148
rtpg wrote: post #103

Earlier quoted context omitted.

If you think that objectively spending money on leisure is bad, my claim is that you are in a minority with that thought process. My implication here is not that being in a minority changes whether something is objectively true or not (it doesn't!). But I will outright say that I do not believe this, and I think that most people do not believe this. Claiming to believe that leisure is bad objectively is, in my opinio…

>If you think that objectively spending money on leisure is bad, my claim is that you are in a minority with that thought process. Strawman. The topic at hand isn't about spending money on leisure but taking out a loan to pay for a fucking burrito.

This is meandering a bit (and I'll once again state that I think Burrito Now Pay Layer is Bad(TM)), but the flow here is (forgive the paraphrasing):

- zug_zug said "we should talk about economics objectively" and claimed "bnpl is one of a dozen services that extracts money from those whose judgment we doubt" , giving examples of other services in that category

- I replied to that claim, saying that I believe their claim that, for example, junk food is a service that extracts money from whose judgement we doubt, is likely to be a subjective analysis and not an objective one.

- I further said that I think you could end up with a believe that it was an objective analysis if you are a person who has reached the conclusion that spending money on leisure is bad

- I am then claiming that I doubt that there's an objective chain of logic that gets you to "spending money on leisure is bad". My reasoning is that I believe that to not be the position held by many people, on top of my belief that generally most people are not extremely smart.

Absent the "spending money on leisure is bad" claim, I don't see a claim to saying that, _objectively_, junk food, sports cars etc is an indicator of people applying bad judgement. And so saying "well BNPL is objectively just yet another stupid tax" is not a well founded argument in my opinion!

"I think Burrito Now Pay Later is bad" is a fine statement, and doesn't try to apply a layer of objectivity that, in my view, crumbles pretty quickly.

Re: Burrito Now, Pay Later

#155

Post by rtpg »

simplify wrote: post #121
rtpg wrote: post #103

Earlier quoted context omitted.

If you think that objectively spending money on leisure is bad, my claim is that you are in a minority with that thought process. My implication here is not that being in a minority changes whether something is objectively true or not (it doesn't!). But I will outright say that I do not believe this, and I think that most people do not believe this. Claiming to believe that leisure is bad objectively is, in my opinio…

Sorry to press, but I'm not sure if you answered my question. Why mention that you think most people do not believe it? In your latest comment, you didn't justify, but you did "outright say" it again. What value does bringing it up have? Not trying to be combative, just thought it's an interesting point in this discussion of objectivity vs subjectivity.

I'm just saying I doubt that zug_zug has actually unlocked some chain of reasoning to say that all that stuff is objectively bad. If they did, what's stopping everyone else from doing it? I am expressing doubt.

Like if someone showed up and said "I can predict lottery numbers". Maybe I'm talking to someone who has figured it out. Maybe I'm talking to someone who is wrong. This isn't at the same level but the claim to objectivity feels pretty close to me!

I think zug_zug's claims are based in a worldview, and not derived from some objective truth. That's fine! We are allowed to inject our own preferences into these discussions! It feels intellectually dishonest to pretend that we're working off of some objective truth of how the world "should" be.

Re: Burrito Now, Pay Later

#156

Post by skybrian »

pxndx wrote: post #7

Absolutely unhinged content from someone who needs to touch grass. Payday loans are scams that prey on the poorest, most uneducated people. This industry is actively harmful to society. But hey, I'm sure writing this helps you sleep at night.

This looks better than a regular payday loan since it’s zero interest. The interest expense is still there, but paid collectively, much like the cost of a store’s generous return policy or of its advertising.

It seems like quite a racket, but doesn’t look like “preying on the poorest.”

Re: Burrito Now, Pay Later

#157

Post by bcoates »

spicyusername wrote: post #100

One reason is that someone’s or a company’s income doesn’t always align perfectly with when they want to buy things. When we're talking about financing the construction of a new downtown office tower, a new apartment complex, or the unexpected maintenance of your business's whole auto fleet, I can absolutely see the argument that credit is a mechanism of greasing the wheels of the economy and allowing things to happe…

There's two obvious "legitimate" reasons to use credit: to smooth out expenditure volatility (a big purchase like a house, an emergency) and to smooth out income volatility (a temporary lack of a job). If you are suddenly sans job and living on savings/unemployment/charity etc., but have a perfectly reasonable expectation of long-term average income much above your short-term situation, financing a burrito makes sense--you’re being cash-flow efficient (extending your runway, if you will)

Also, in my personal experience, a new job often brings various costs (food, clothes, transportation, relocation, etc) long before the paychecks show up. There was a time in the early 2000s where being able to klarna a tank or two of gas until my paycheck landed would have been extremely useful to me

Re: Burrito Now, Pay Later

#158

Post by sgerenser »

dmayle wrote: post #33
zug_zug wrote: post #13

Earlier quoted context omitted.

Is this really how this works? Do you have a source? Also… in this situation does klarna get any of that 1340 or does Alice just delete the app?

This is a bit of an exaggeration, but otherwise correct... Alice has $100 in burrito debt at 0%, but misses one payment, which automatically reverts to a 30% interest rate, back-tracked to the start of the "loan". She also receives a $7 late payment fee, which is equivalent to about 90% interest for the time covered. Her bank will often re-order operations on a given day in order to maximize the fees charge (yes, thi…

I believe reordering of transactions to maximize NSF fees was made illegal by the CFPB, but Trump recently rescinded the rule.

Re: Burrito Now, Pay Later

#159

Post by pseudo0 »

bcoates wrote: post #81
zug_zug wrote: post #12

I think this would be more informative if it dropped all moral pretense and just talked about the economics objectively. If we’re gonna call a spade a spade, bnpl is one of a dozen services that extracts money from those whose judgment we doubt (like gambling, lottery, junk food?, drugs, overpriced status-symbol vehicles, or even “digital goods”).

But if you read the article, it doesn’t? bnpl makes its money off charging merchants a few points higher service fees than cards, which for a lot of merchants is worth it to close the deal. (Unstated in the article is that richer people with better credit have regular access to no-interest/negative fee consumer loans on the order of 6-18 mos., so they have no reason to use BNPL)

I seriously doubt the long-term viability of BNPL for merchants. Sure, in the short-term it boosts sales because people who don't have money are able to purchase stuff, but eventually those marginal consumers will end up exhausting their BNPL credit as well. Meanwhile the merchant ends up paying 5% on a bunch of transactions for people who could easily afford to pay now, but don't because it's "free". The only way this model works long-term is if they get enough leverage to force merchants to offer BNPL at the same price as cash, the same anti-competitive model used by credit cards.

Re: Burrito Now, Pay Later

#160

Post by simplify »

rtpg wrote: post #155
simplify wrote: post #121

Earlier quoted context omitted.

Sorry to press, but I'm not sure if you answered my question. Why mention that you think most people do not believe it? In your latest comment, you didn't justify, but you did "outright say" it again. What value does bringing it up have? Not trying to be combative, just thought it's an interesting point in this discussion of objectivity vs subjectivity.

I'm just saying I doubt that zug_zug has actually unlocked some chain of reasoning to say that all that stuff is objectively bad. If they did, what's stopping everyone else from doing it? I am expressing doubt. Like if someone showed up and said "I can predict lottery numbers". Maybe I'm talking to someone who has figured it out. Maybe I'm talking to someone who is wrong. This isn't at the same level but the claim to…

> If they did, what's stopping everyone else from doing it? I am expressing doubt.

This is a pretty interesting topic on human nature. Chain of reasoning doesn't always result in proper action. For example, my cousin has been having a lot of health problems lately. Logically he knows that alcohol is contributing to them. Yet, when he's out with his friends, he can't help but drink anyway, despite knowing (and likely ignoring for the moment) the consequences of doing so.

Similarly, things like junk food and overpriced status-symbol vehicles have objective costs that prey on the weaknesses of human nature. Whether to restrict such things, and by how much, is where the subjective aspect comes in.

This also all presumes we share the same values of "let's try to reduce human suffering somewhat". A libertarian, for example, would just say "live and let live".

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