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Many players out there fighting fiercely to get more customers, every-time making it easier to get financing, which might not necessarily be the best on the lon

Many players out there fighting fiercely to get more customers, every-time making it easier to get financing, which might not necessarily be the best on the long run or in the best interest of consumers. There has been multiple analysts and news outlets writing about this. When 33% of users from BNPL services claim that a reason to do it is that their credit cards are already max, I see this as a potential issue. Also as someone that has been testing & doing research on this field, it is amazing how the services differ between Europe/US and Latam (probably Africa too but I didn't dig into this one yet). BNPL services in Latam charge quite high interest to the consumers. I'm a bit worried when I get ads to pay for sneakers over the course of 3 months and they would end up costing around 30% more, which means many people actually purchase such items in such way. What are your guys thoughts? While easier access to credit can be quite helpful, it does seem like there might be some potential issues in the industry, particularly in these days.

bitxbitxbitcoin 4y ago
Credit needs to be easier for small business formation, not sneakers. This is predatory lending through and through dresses up as I don’t know what but it preys on the people with the least financial literacy.
mrweasel 4y ago
> While easier access to credit can be quite helpful I've argued against this so many times, both online and to the management at a previous job. There is a small group of people to whom these payment options are completely sensible, and they manage them very responsibly. These people will argue in favor of Buy Now, Pay Later as well as easy access to small loan, reasoning that they are a good options for people like themselfs. Their argumentation is more or less valid, it's just they aren't the target customers for this type of payment. It might not be situation anymore, but it the past a company like Klarna made no money on a customer who paid off their loan on time. The entire business model was people who needed payment plans, people who made bad finasical choices, people who were already poor. My take is that BNPL is such a dangerous product, for a certain group of people, that it should be at least be restricted to select purchases. For instance, you should NEVER be allowed to use it for fashion, consumer electronics, and other now essential goods. Sadly that's where these options are primarily presented to consumers.
- gruez 4y ago
  >For instance, you should NEVER be allowed to use it for fashion, consumer electronics, and other now essential goods. So what's left? Cars and houses?
dehrmann 4y ago
> When 33% of users from BNPL services claim that a reason to do it is that their credit cards are already max, I see this as a potential issue. I also find it bizarre that 45% say it's easier to make payment than on a credit card and 44% says it's more flexible. Really?! I don't find it hard to give the credit card company money, and it seems like lower interest rates should be #1.
- HWR_14 4y ago
  I think "more flexible" means that the payment periods are better aligned with your pay periods. The CC companies are going to want money every month on the same day.
  - smugma 4y ago
    Most credit cards let you pick your payment due date.
  - gruez 4y ago
    Why is this a relevant factor? With a credit card you have a 3-4 week grace period to pay the bill. If you get paid every 2 weeks/twice a month then the due date is never more than a week away from your last paycheck.
    - HWR_14 4y ago
      No, you have a 3-4 week grace period. People with poor credit do not.
HWR_14 4y ago
I think 30% over 3 months is a lot, but not prohibitive. First that's only like 27% after adjusting for inflation. Second, they're for luxury goods. Third, there was has to be a fairly high default rate. I mean, that's a lot higher than a US credit card, but a lot less than a US payday loan.

bitxbitxbitcoin 4y ago

Credit needs to be easier for small business formation, not sneakers. This is predatory lending through and through dresses up as I don’t know what but it preys on the people with the least financial literacy.

mrweasel 4y ago

> While easier access to credit can be quite helpful I've argued against this so many times, both online and to the management at a previous job. There is a small group of people to whom these payment options are completely sensible, and they manage them very responsibly. These people will argue in favor of Buy Now, Pay Later as well as easy access to small loan, reasoning that they are a good options for people like themselfs. Their argumentation is more or less valid, it's just they aren't the target customers for this type of payment. It might not be situation anymore, but it the past a company like Klarna made no money on a customer who paid off their loan on time. The entire business model was people who needed payment plans, people who made bad finasical choices, people who were already poor. My take is that BNPL is such a dangerous product, for a certain group of people, that it should be at least be restricted to select purchases. For instance, you should NEVER be allowed to use it for fashion, consumer electronics, and other now essential goods. Sadly that's where these options are primarily presented to consumers.

gruez 4y ago
>For instance, you should NEVER be allowed to use it for fashion, consumer electronics, and other now essential goods. So what's left? Cars and houses?

dehrmann 4y ago

> When 33% of users from BNPL services claim that a reason to do it is that their credit cards are already max, I see this as a potential issue. I also find it bizarre that 45% say it's easier to make payment than on a credit card and 44% says it's more flexible. Really?! I don't find it hard to give the credit card company money, and it seems like lower interest rates should be #1.

HWR_14 4y ago
I think "more flexible" means that the payment periods are better aligned with your pay periods. The CC companies are going to want money every month on the same day.
- smugma 4y ago
  Most credit cards let you pick your payment due date.
- gruez 4y ago
  Why is this a relevant factor? With a credit card you have a 3-4 week grace period to pay the bill. If you get paid every 2 weeks/twice a month then the due date is never more than a week away from your last paycheck.
  - HWR_14 4y ago
    No, you have a 3-4 week grace period. People with poor credit do not.

HWR_14 4y ago

I think 30% over 3 months is a lot, but not prohibitive. First that's only like 27% after adjusting for inflation. Second, they're for luxury goods. Third, there was has to be a fairly high default rate. I mean, that's a lot higher than a US credit card, but a lot less than a US payday loan.