Episode summary
The Rise of 'Buy Now, Pay Later'
Bloomberg Surveillance
· · 5 min · Hosts: Stacey Vanek Smith, Max Chafkin
Summary
Buy now, pay later is moving from a niche checkout option into a mainstream consumer payment method, with the hosts citing an estimate that about 7% of purchases around Black Friday used BNPL. The discussion centers on why it is spreading beyond discretionary shopping into groceries and food delivery, and why it resonates with younger consumers who may not want, or qualify for, traditional credit cards.
The hosts argue that BNPL is still too new for the market to fully understand its risks. Missed payments may be common, with one host citing a missed-payment rate as high as 40%, but reported default rates remain much lower, around 2% to 3%, which is below credit cards. Because many of these loans are not yet tightly routed through credit bureaus, the credit consequences for consumers can be unclear.
Retailers like BNPL because it can lift spending, and the companies themselves want to build customer relationships the way credit card issuers do. The host says firms like Klarna and Affirm are offering discounts and easy installment plans to acquire users, especially younger shoppers and consumers with thin or weak credit histories. The tension is whether BNPL is just a modern credit card substitute or a system that could encourage overspending before the risks are fully visible.
Key takeaways
- The hosts say roughly 7% of Black Friday purchases used buy now, pay later, showing rapid mainstream adoption.
- One host says missed-payment rates may be as high as 40%, but default rates are still only about 2% to 3%.
- BNPL is attractive to younger shoppers and people with weak or no credit, according to the discussion.
- Retailers like BNPL because it can boost conversion and encourage higher spending, especially during holiday shopping.
- The hosts say Klarna and Affirm are trying to build long-term customer relationships the way credit card companies do.
Notable quotes
“I think around 7% of purchases around Black Friday were made using buy Now Pay later, which is huge”
“the default rates are still pretty low. I think bottom line is this is a pretty new thing”
“The other side of it is kind of what you're hinting at, Paul. There's the risk that you're buying something and you aren't really thinking through how you're going to pay for it”
“I think the deferral rate or the missed payment rate is up to 40%, which is huge. But the default rate is is like two or 3%”
“It skews much younger. So you're right to be worried about your children”
How the episode opens
As you said, buy now, pay later. It's becoming more and more popular. I think around 7% of purchases around Black Friday were made using buy Now Pay later, which is huge, is a great article by Amanda Moll out about buy now, pay later.
And of course we've seen just this this spreading around to all kinds of purchases, including now groceries and food delivery. And because, you know, these payments as a as a purchaser, you don't pay interest. And these big companies like Klarna being the biggest they sell they, you know, are selling potentially that debt.
It's all happening in private markets. So we don't really know. Okay.
But potentially there are actually Brito Brito backed securities. So what are the defaults like, Max, in that area right now? Like are a things are people having trouble paying these things?
But there are a lot of people who are we talked about this with a minimal of business we unpack is there are people missing payments, but the default rates are still pretty low. I think bottom line is this is a pretty new thing and it's not yet clear if people are just using this essentially like a credit card. I think the response from your kids would be, if they want to use it, is just like this is a credit card.
It's no different. And like many of the buy now, pay later users are just using them as a substitute. They link their bank account into.
It is just a way that they're, you know, sort of moving the money the same way people use credit cards. And in fact, some of these buy now pay later. Companies are starting to do you know, they have lounges.
They're they're doing some of the same things that credit card companies are doing.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- bnpl rise
- holiday shopping
- millennial and gen-z adoption
- fintech competition
- consumer credit
Companies and tickers mentioned
- Klarna
- Affirm
Watch the episode
Watch “The Rise of 'Buy Now, Pay Later'” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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