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I don't really have a horse in this race, but surely the big credit card companies are the big dogs in the "buy now pay later" market? Or is there some highly t

by WJW 5y ago

I don't really have a horse in this race, but surely the big credit card companies are the big dogs in the "buy now pay later" market? Or is there some highly tech-specific submarket these days?

mistrial9 5y ago
credit has been the ruin of whole societies -- what can go wrong?
yladiz 5y ago
It's similar but a little different, as it is usually shorter (you need to pay it in a set number of installments over a fixed schedule, like 4 weeks) and there's no interest if you pay on time, at least with Klarna. I have no idea how they make money (maybe they make some money from the interchange?) but that's the gist of their business model.
- nivenkos 5y ago
  They make money when you don't pay on time.
- hogFeast 5y ago
  They earn a fee from merchants and, despite what they say, I believe most of these companies also have products that aren't zero interest (Affirm also sells some of its loans...I have no idea about this, I have relatively good knowledge of accounting but I am not 100% on the accounting for this so I have no idea whether it actually generates income). The fee from merchants is interesting because the claim is: the fee from merchants is going to be larger than the losses from making bad loans (and the costs of servicing). I am very sceptical of this. Management describe their underwriting model as largely using stuff like the product bought, the retailer used, the value of the order...it just sounds very suspect. And that is before you consider the valuation, the legislative risks, the interest rate risk (doing 0% loans stops making sense if interest rates rise), etc. I am in the UK and these kind of businesses usually trade at very low multiples because the regulation in the space is so high. I would regard $10bn market cap as a pretty jazzy valuation for Affirm, the stock is at $35bn.
nine_zeros 5y ago
Buy now, pay later platforms allow random e-commerce sites to support installment payments. Thus, mom and pop e-commerce sites don't need to build it out. It's all provided as a SaaS.
cactus2093 5y ago
Credit cards are in a great position to get into this market since they can use your existing line of credit and don't require a new credit check in order to give you a loan. The Apple credit card is a great example, where now you can buy any apple products on a monthly payment plan with no interest and without any extra friction at check-out. But I don't think most banks issuing credit cards are in this business yet. And of course making normal purchases on credit cards is a terrible way to "buy now pay later" because the interest rates are so ridiculously high. It will be interesting to see if more banks get into this market seeing how successful Klarna, Affirm, etc. seem to be, because it does eat into their existing high interest rate profits on credit cards.

by WJW 5y ago

I don't really have a horse in this race, but surely the big credit card companies are the big dogs in the "buy now pay later" market? Or is there some highly tech-specific submarket these days?

mistrial9 5y ago

credit has been the ruin of whole societies -- what can go wrong?

yladiz 5y ago

It's similar but a little different, as it is usually shorter (you need to pay it in a set number of installments over a fixed schedule, like 4 weeks) and there's no interest if you pay on time, at least with Klarna. I have no idea how they make money (maybe they make some money from the interchange?) but that's the gist of their business model.

nivenkos 5y ago
They make money when you don't pay on time.
hogFeast 5y ago
They earn a fee from merchants and, despite what they say, I believe most of these companies also have products that aren't zero interest (Affirm also sells some of its loans...I have no idea about this, I have relatively good knowledge of accounting but I am not 100% on the accounting for this so I have no idea whether it actually generates income). The fee from merchants is interesting because the claim is: the fee from merchants is going to be larger than the losses from making bad loans (and the costs of servicing). I am very sceptical of this. Management describe their underwriting model as largely using stuff like the product bought, the retailer used, the value of the order...it just sounds very suspect. And that is before you consider the valuation, the legislative risks, the interest rate risk (doing 0% loans stops making sense if interest rates rise), etc. I am in the UK and these kind of businesses usually trade at very low multiples because the regulation in the space is so high. I would regard $10bn market cap as a pretty jazzy valuation for Affirm, the stock is at $35bn.

nine_zeros 5y ago

Buy now, pay later platforms allow random e-commerce sites to support installment payments. Thus, mom and pop e-commerce sites don't need to build it out. It's all provided as a SaaS.

cactus2093 5y ago

Credit cards are in a great position to get into this market since they can use your existing line of credit and don't require a new credit check in order to give you a loan. The Apple credit card is a great example, where now you can buy any apple products on a monthly payment plan with no interest and without any extra friction at check-out. But I don't think most banks issuing credit cards are in this business yet. And of course making normal purchases on credit cards is a terrible way to "buy now pay later" because the interest rates are so ridiculously high. It will be interesting to see if more banks get into this market seeing how successful Klarna, Affirm, etc. seem to be, because it does eat into their existing high interest rate profits on credit cards.