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On today’s newsletter:

• An investigative report in the BNPL space.

• Why you should just pay up front for mostly everything.

• Angry old man (me) yells at BNPL

Let’s get to it!

I was at the mall (can you believe it?) a few weeks back with my girlfriend doing some shopping when I noticed something particularly peculiar. Most, if not all the stores had a Klarna, Afterpay, Affirm, or another in-house type of payment service posted on the front window showing that it was accepted there, like it was a new type of credit card or something. Which technically you could argue it’s kind of like that, but I digress.

Perhaps you’ve used the services. Maybe you’ve seen the stories and articles where people are financing their Chipotle burrito and even a $10 paper towel Target run into 4 separate payments of $2.60. Don’t believe me? Read about it here.

It’s like we’re living inside one of those old school infomercials you’d see growing up where Billy Mays was trying to shill Oxy Clean. Except this time, it’s every purchase imaginable including that dollar menu McChicken you ate last week. Don’t got a buck? Don’t fret. Just pay 4 equal payments of .$65 and this McChicken is yours…

Lol. Okay. The services do have some purchase minimums, but still, where is the line drawn? Near the end of the piece, I have a fun screenshot for you, but let’s start at how we got into this freaking financing mess.

What is BNPL?

Buy Now, Pay Later. That’s about it. It’s not quantum computing or rocket science. You’re paying installments over time (sometimes with interest) for an item instead of buying it outright right away. When you pay this way, you pay through an intermediary company (like mentioned above) that predetermines your creditworthiness and ability to repay.

They then set an interest rate and fees if you should miss a payment. It’s like a hyper-niche credit card for one purchase where interest is guaranteed (depending on the BNPL company) and fees are accrued if you miss a payment.

Who’s it for?

The financially disadvantaged, people who lack education, people who can’t pay full price but can pay over time, anyone. I have even seen credit cards offer this service on certain credit cards if the purchase was high enough (but you don’t get rewards).

Basically, it’s for people who want a thing, and they want it to be perceived as cheaper. Which is a whole hell of a lot. Look at the CAGR for the BNPL Market below. We’re just getting started. And it’s already everywhere. What’s next, am I going to pay $2.5 every week for Netflix?

What’s the driver of BNPL

Modern life. Expenses being high, income being low. People seeking out second jobs. Rent outpacing income. Everything being expensive. Democratizing access to goods and services once seen unobtainable or too expensive (they still are). I put some charts below to solidify some of these claims, but if you are alive and not living under a rock, you know.

Yeah, you don’t even want to see the chart for college tuition. Yikes. I think you see why these services are exploding in popularity. Americans are in a discretionary income crunch. And businesses are looking to cash in on those still wanting things they can’t afford. Debt is also becoming very commonplace and casual among our peers, it seems. Got $5k in credit card debt? Who doesn’t? No shame anymore. It’s like personal financial groupthink as taken over and now we will succumb to it.

It’s a slippery slope.

I wouldn’t use these services and I don’t want you to use them either. If you can’t afford an item, you can’t afford an item. The screenshot below from Afterpay.com is IRONIC. You’re financing purchases from Macy’s, Nike, and Shein? Yeah, you’re in control alright. Control of being a financial doofus! Chill fam! That’s out of control!

Obviously, cars and homes aren’t included in this discussion. Mortgages and auto loans are different. I still would say an auto loan isn’t great but yes, those are large purchases, and most people need to finance them. Not a problem. Most BNPL purchases are everyday items. Clothes. Food. Experiences. Etc. It’s a whole different area.

See how all these services lower the barrier of entry into expensive items to make them seem affordable? As long as you have some small form of income, you can destroy that for some Macy’s junk! Woo!

These companies know their market. It’s not you (I hope) or I. It’s folks who likely don’t know any better or think they’re getting some good deal. There’s a lot of money to be made in this line of business and there’s no shortage of Americans with a small bank account and lofty material desires.

The fact that this article here even exists just pisses me off. Financing your Amazon Prime Day purchases? Really? How about if you don’t have money for your $5 Amazon Basics Shake Weight you just sit tight, huh? Damn this is just annoying how commonplace this all seems. What is it about people using BNPL services says “Yes, I have my life together”. “Yes, I am fiscally smart”.

Rant over. Know someone who abuses these services? Send this to them. They’ll thank you. Knowledge is power my friends! Hope you got something out of this.

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Stay Fiscally Responsible My Friends,

Andrew

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