Buy-now, pay-later may be on its way out

The Future. The pandemic saw the rise of buy-now, pay-later (BNPL) apps that allow users to take a product home after only paying a small portion of the price. But as high delinquency rates chip away at investor interest and spark federal scrutiny, the BNPL bubble may soon burst.

Too good to be true
The Atlantic documents the rise and fall of BNPL apps like Affirm, Afterpay, and Klarna.

• BNPL services make their money by charging retailers a processing fee three to four times that of credit card transaction fees — which costs users nothing.
• From 2019 to 2021, the total value of BNPL loans originated in the US grew by 1,000% from $2 billion to $24.2 billion.
• BNPL is most popular with young people, with half of the model’s users under 33.
• Many BNPL users don’t have (or trust) credit cards because they saw their parents saddled with credit card debt back in the 2008 crisis.

Stay away, layaway
BNPL use reportedly results in a permanent $60 increase in weekly spending, and that behavior has led BNPL delinquency rates to quickly outpace those of credit cards. As a result, investors are losing interest in BNPL.

Moreover, the Senate has pressured the Consumer Financial Protection Bureau to review BNPL services, which offer users none of the protections given to credit cards. Later, alligator.