Chart of the Day: The Youth of America Pile into Buy-Now-Pay-Later Schemes

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.

Buy Now Pay Later Trends

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.

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 RWR original article syndication source.

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Written by Tom Williams

Born down on the farm in America's Midwest, my early life was spent climbing the ladder via a long career in information technology. Starting as a technician, and after earning a degree going to night school, I eventually found a place working at ATT Bell Laboratories as a software engineer.

Later moving into management and then a long stint in a major management consulting firm working with major banking, telecommunications, and retail companies. Working in various states in America, I also spent considerable time living and working in several European countries - currently expat in France. As a side career, I was heavily involved in real estate development and an avid futures trader. This experience can give one a unique view of the world.

The storm clouds of dark change are near. Today America is at a crossroads. Will it maintain its prowess as a national leader in the free modern advancing world, or will it backtrack in the abyss of the envy identity politics of tyrannical socialism, and the loss of individual freedoms. The 2020 election may have decided this. Join the Right Wire Report team and make a stand.

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