Tom Williams
This holiday season, merchants are poised to use “buy now, pay later” like never before. Not just a hot new payments or eCommerce feature, it’s also a key marketing feature to drive more sales for merchants.
The growth has been quick. Consumers are expected to make $100 billion in “buy now, pay later” purchases in 2021, up from $24 billion in 2020, and could increase up to 15 times its current volume by 2025. See here a list of 15 of these types of companies offering these services.
As if I don’t need to ask – what is a Buy-Now-Pay-Later (BNPL) scheme? BNPL is a type of short-term financing that allows consumers to make purchases and pay for them at a future date, often interest-free. Also referred to as “point of sale installment loans,” BNPL arrangements are becoming an increasingly popular payment option, especially when shopping online. Using BNPL financing can be convenient for consumers, but there are some potential downsides to consider.
In 2018 BNPL was neglagable. The BNPL is now and will be exploding. One thing is clear, the largest target market for BNPL services is the youth of America.
Usage of BNPL services has soared across generations in the US, especially among Gen Z. These financing solutions will have more than 45 million US users in 2021, and that figure will top 76 million in the next four years. In 2025, over 40% of millennials and Gen Zers will make use of a BNPL service at least once that year. See the chart below and learn more here.
Right now, BNPL is not regulated in the way that credit cards are. That means there are no standards for disclosures on fees, amounts owed, credit reporting, and payments. Even the due date of a BNPL payment is not as clear as a credit card with a consistent payment date.
One of the biggest issues is that they’re operating pretty much largely outside of the regulatory system and outside of federal and state oversight for a variety of different reasons. This could change as regulators rein them in. Learn more here. See below for a quick overview video of what is going on with BNPL.
Some of this may sound good, but the downsides could affect the youth of America, the society, and the broader economy, as the amount of BNPL schemes skyrocket. Consider the following.
- Major retailing companies are targeting the youth of America to get them on the hook for ever-increasing amounts of debt. Make no mistake, BNPL is debt.
- In the early years of one’s life, it is important to save for investment and retirement – even buy a house. Saddled with BNPL will make this even harder, thereby perhaps affecting long-term growth prospects.
- Culturally it teaches the youth not to value what they buy. At the time of purchase, it may even feel free. But as the old adage says, “there is such thing as a free lunch.“
Are BNPL schemes going to end well for the youth? I think you know the answer to this. Give us your thoughts on this in the comment section below.
See more #chartoftheday posts.
If you found this article informative, please consider a small donation to our coffee cup to help support Conservative Journalism – or spread the word. Thank you.
RWR original article syndication source.
This is the reverse of old-school layaway.