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Burrito Now, Pay Later

enterprisevalue.substack.com

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Re: Burrito Now, Pay Later

#251

Post by potato3732842 »

intended wrote: post #187
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…

Yeah. I get the argument for pricing risk. That’s a genuine improvement on the state of the art. I dont get NINJA loans, because they represent an unfair fight - a sophisticated loan originator and sales team against people without the background and skills to judge that risk

The person taking out the loan doesn't need to judge the statistical risk or develop an algorithm to compute it, just the individual one.

It's like the insurance when you rent a piece of equipment. The insurance is $8 every time because they judge that to be the statistical risk. Sometimes I'm doing something sketchy and take them up on it. Sometimes I'm not and I don't. The problem is a very simple one on my side but very complex on theirs.

Re: Burrito Now, Pay Later

#252

Post by potato3732842 »

flakeoil wrote: post #228
aianus wrote: post #191

Earlier quoted context omitted.

You can pay the BNPL with a credit card to take advantage of both interest-free periods and get credit card points. There is really no reason not to use BNPL, even if you can pay cash.

Yes, there is. You take on a risk of forgetting to pay or that there is missing cash on your account so that the payment does not get done. Now you all of a sudden have to pay interest. And for what benefit, just to lend the cash for free for a month? What would you do with that cash for one month which is so profitable and risk free to compensate for the quite high risk of missing one of those BNPL invoices?

That's just a fancy way of saying you take on record keeping overhead. If you're not willing to do that then you probably shouldn't even have credit cards so the discussion of pairing CCs and BNPL is irrelevant.

Re: Burrito Now, Pay Later

#253

Post by helge9210 »

catlikesshrimp wrote: post #221
lumost wrote: post #193

Earlier quoted context omitted.

Curiously, medieval societies struggled with “usury”. Effectively being a wage earner was a tough game as you might owe rent, have a bad month, or end up overly indebted. Most wage earners eventually became indentured servants or worse. This contrasts with peasants who had permanent land rights and owned everything they produced, and did not have a fixed rent. It’s not just that people don’t understand debt, it’s tha…

>"This contrasts with peasants who had permanent land rights and owned everything they produced, and did not have a fixed rent" There are places where they didn't own anything. Decades ago I read that at some point each feudal lord coined his own currency for his peasants. If a peasant escaped, he wouldn't have means to take anything with him. Same in Russia. A couple centuries ago, serfs came with the land. They cou…

Correction: slavery in Russia/Soviet Union ended in 1974 when all the rural residents got passports and with it the right to leave the collective farm and change the profession.

Re: Burrito Now, Pay Later

#254

Post by hbsbsbsndk »

BNPL seems primarily like a regulatory arbitrage because of increasing scrutiny of payday loans and limits on credit card interest rates. Do we really think securitization of burrito loans is unlocking new liquidity in the market that Visa and Mastercard couldn't provide?

Re: Burrito Now, Pay Later

#255

Post by potato3732842 »

aianus wrote: post #191
ivanbalepin wrote: post #165

Enjoyed the article, but the author was correctly questioned in the substack comments how is this any different than a credit card for the borrower and what justifies the "interest-free" myth here, since the BNPL payoff period largely overlaps with the CC grace period. To which the author responds: > Credit card float only lasts if you pay the full statement balance by the due date but that is identical to BNPL, it's…

You can pay the BNPL with a credit card to take advantage of both interest-free periods and get credit card points. There is really no reason not to use BNPL, even if you can pay cash.

I don't see how the BNPL interest free period helps you here. It basically just delays your withdrawal so you get 6wk (or whatever) more return on the few grand financed. And if you maintain a constant balance the effect is going to stay the same, not increase or decrease, so it's basically the same overall effect as a one time contribution of the financed amount, which is probably very small relative to portfolio size for anyone who ought to be doing this.

The way you can use CC points is well documented but it stands on it's own separately and I don't think it adds anything but confusion to this example.

Re: Burrito Now, Pay Later

#256

Post by roland35 »

flakeoil wrote: post #231

In the text there are no benefits for the borrower/consumer outlined. BNPL is basically just a scam to lure in people to use this easy option to pay and then charge them late fees and interest once they forget one of their bills. It's not even convenient (except at checkout) because you will get a bill to pay down the line and that's not convenient to pay.

I do not think it's quite this nefarious... They make most of their money from the merchants. The argument being, hey customers who use our BNPL spend more money.

Now, that also doesn't sound great honestly!

Re: Burrito Now, Pay Later

#257

Post by pc86 »

gopher_space wrote: post #94
djoldman wrote: post #89

Earlier quoted context omitted.

This quickly devolves into semantics as you pointed out. Do you mean that reasonably all people agree that murder, rape, pedophilia, etc. are bad? Aka if close to everyone thinks something, then that's an "objective" opinion? If so, that makes sense. However, the parent comment may mean to say that wrong and right are qualities that humans place on things/events/communications... and I think that makes sense. Physics…

> Physics/chemistry/math has nothing to say about vice and virtue. Leaded gasoline.

What does physics, chemistry, or math have to say about the vice or virtue of leaded gasoline? What's the equation where the right side says "good" or "bad?"

Re: Burrito Now, Pay Later

#258

Post by joshstrange »

I found this article pretty disgusting to be honest.

The glee around BNPL and, frankly, the level of smelling their own farts rubs me the wrong way.

BNPL is just a short-term credit card good for one purchase. A debt product by any other name would smell as sweet. There is nothing special about BNPL, it’s not safer, it’s not easier, it’s incredibly destructive IMHO. It just encourages people to spend money they don’t have.

The author’s comments about how “oh look, now you have 6 weeks to pay this off, easy to understand” are either incredibly native or just straight up evil (knowing they are full of shit but still pushing that narrative). People don’t often have 1 BNPL, they have many. That slope is very slippery.

“I’ll just BNPL this 1 purchase, only this once, I get paid next week anyway”

“Crap, my paycheck isn’t enough to pay for X and this debt, I’ll just BNPL X to get me through this but it’s the last one!”

….

“Now I have 10 BNPL that are impossible to track and eat into my paychecks such that I’m forced to continue BNPL. Also I’ve gotten hit with late fees all over the place but I haven’t run the numbers of the effective interest I’m paying because that’s hidden from me”

Also I’m _so glad_ the author draws the line at sports betting. Really shows how upstanding they are /s

Re: Burrito Now, Pay Later

#259

Post by joshstrange »

SOLAR_FIELDS wrote: post #3

This treatise, from someone obviously in the industry, is merely another payday loan shark attempting to justify the existence of their clearly predatory products. How many of the consumers of this product are even remotely able to comprehend the piece as-is described? The article describes a "complete market". Yes, a market that is completely able to extract as much money from an exploited, uneducated populace as po…

Why did I have to scroll so far down in the comments to find someone revolted by this?

I feel like all the comments about this (at least currently) are buying into the premise, taking these arguments at face value, and agreeing that BNPL is a _good_ thing, just insane.

Re: Burrito Now, Pay Later

#260

Post by gruez »

mattmanser wrote: post #247
bluedino wrote: post #239

Earlier quoted context omitted.

> In brazil, many people don’t eat meat because it’s too expensive During the 2008 recession, I remember a woman who called in to one of the financial advice radio shows (Dave Ramsey?). She was talking about how her husband has been laid off and they were eating beans, tortillas and rice, and how i simply thought, "so you're eating....mexican food?" That said, it's crazy how a burrito is $12 now and a two taco, beans…

That's also labor and capital costs though, not just raw ingredient costs. It's also a byproduct of minimum wage, the time spent on making the burrito, prepping the kitchen, cleaning up, processing the order, doing the accounts, etc. all adds up meaning a single meal has a minimum cost directly proportional to minimum wage. Though don't get me wrong, minimum wage is an overall good imo. However if we had universal ba…

>However if we had universal basic income instead, and thus could scrap minimum wage, you might see the price of a burrito drop.

...at the expense of massive fiscal spending needed to fund the UBI in the first place.

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