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This treatise, from someone obviously in the industry, is merely another payday loan shark attempting to justify the existence of their clearly predatory produc

This treatise, from someone obviously in the industry, is merely another payday loan shark attempting to justify the existence of their clearly predatory products. How many of the consumers of this product are even remotely able to comprehend the piece as-is described? The article describes a "complete market". Yes, a market that is completely able to extract as much money from an exploited, uneducated populace as possible. Is that the kind of market efficiency we should be advocating for? The part of the "free market" that these fat cats always gloss over is that a cornerstone of a free market is that the consumers of the market are able to make educated decisions about the products that are available to them. If the populace is incapable of doing so in the way the products are presented to them, is that really a free market?

tlonny 1y ago
The product (from the perspective of the consumer) _is_ relatively straightforward IMO. What isn't straightforward is accurately modelling the credit risk of the bonds when this class of debt is securitized (the meat of this article). Thus I don't think understanding this article is a prerequisite for making educated decisions re: BNPL.
tecleandor 1y ago
It's unhinged. > Is financing your lunch a sign of societal decay? Maybe, maybe not. Financing your lunch means you can't pay for your lunch. And then somebody comes to search profit in that. Yep, it's societal decay. Ah, but he draws the line at sports bets, he doesn't like that.
- margalabargala 1y ago
  > > Is financing your lunch a sign of societal decay? Maybe, maybe not. > Financing your lunch means you can't pay for your lunch. And then somebody comes to search profit in that. Yep, it's societal decay. Counterargument: almost always when I buy something, lunch or otherwise, I put it on a credit card, which I pay off always before the due date but essentially never on the same day I had the lunch. Viewed through the lens of a society that only paid up front in cash, what I do would be viewed as risky and irresponsible; but it is not. BNPL as it currently exists, in the form described in this article, is exploitative. But the American credit card system, which is the same sort of thing mildly rearranged, is far less exploitative.
  - pseudo0 1y ago
    The credit card company still takes a 2-3% cut, which absolutely gets passed on to consumers. You get part of it back in the form of credit card rewards and services (eg. fraud protection, charge backs) but it's still a tax on everything. BNPL is worse, they take 5% and all you get is a small loan for a few weeks. Their whole business model relies on it being "free" for middle-class people who will pay back their loans, because the fee is hidden in the purchase price. This is an area where government regulation is actually required, all transaction fees should be disclosed and charged as a surcharge on the base purchase price, whether it's a credit card or BNPL, to provide a fair and competitive market for consumers and merchants.
    - poincaredisk 1y ago
      >This is an area where government regulation is actually required, all transaction fees should be disclosed and charged as a surcharge on the base purchase price, whether it's a credit card or BNPL Btw. in Europe the card thing was solved differently. First, most people use debit cards, not credit cards. Second, card fees are capped at 0.2% which makes it actually a cost saving measure (cash processing is not free).
      - bluedino 1y ago
        People use debit card in the USA as well
        SOLAR_FIELDS 1y ago
        The difference is that in the States a cash discount is only rarely offered. It’s common in some areas (gasoline often costs less when you pay with debit, contractors and other similar small businesses will usually pass that 3% on to the consumer as well) but not others. Much more common is that the business charges the same for both (basically every direct to consumer retailer charges same for both debit and credit). The indirect result is that people with debit cards and cash payers are actually indirectly subsidizing credit card holders in the States. You’re actually operating at a disadvantage if you don’t funnel most of your spend through a credit card in the States
- drivingmenuts 1y ago
  Interesting, because sports betting is waaaay more voluntary than eating. Eating is voluntary, if only for short while.
  - Spooky23 1y ago
    In the same sense as cigarettes. It’s a compulsive behavior.
- sweeter 1y ago
  He doesn't want to admit to being the cause of the rot, it makes him feel bad (but not bad enough to not do it lol)
scubbo 1y ago
Amen. It's been my experience that, for any innovation in financial technology, if you keep asking "and why is that beneficial?" for long enough, you will finally arrive (via tangents into "liquidity" and suchlike) at "it allows those with money to extract more money from those with less money".
- r053bud 1y ago
  Yes. That’s literally the economic system we have agreed upon in the United States States and continue to vote for.
- blagie 1y ago
  I don't know that's quite true. I've seen cases where it allows those with money to extract money from those with a lot of money too. Take this situation: Business A and business B are both doing well and competing with each other in a duopoly. a) No credit: Each business needs to be in the black, and competition is sustainable. b) Credit: Whichever business borrows more money to spend on buying customers is more competitive in the short term (which can lead to monopoly long-term). Both businesses run in the red are and brittle. In any downturn, tightening of credit, etc. both are liable to go under. This competition to raise increasing amount of money to be competitive (to increasing devaluation and/or debt makes for a pretty broken economy), and makes traditional businesses (which invest in R&D from profits) increasingly unsustainable. This even goes to government level. Historically, if e.g. two European powers were in a war, whomever could borrow more to buy weapons / hire mercenaries would have an advantage. Access to credit made for more costly, more deadly wars, and broken national economies. If neither side had access to credit, both sides would be strictly better off.
  - losteric 1y ago
    For the same reason, I’d argue mortgages are a bad thing for consumers by creating this prisoners dilemma around debt.
    - blagie 1y ago
      It depends on the format of mortgages. There are parts of the US where home ownership is bottlenecked by land prices, where this is absolutely the case. And there are parts where it's bottlenecked by construction costs, where this is not the case. "Are a bad thing" is also complex. I would agree they WERE a bad thing when introduced. Today, there is a complex problem of how you unwind this phenomenon. If you invested your life savings plus $800k of debt into a $1M home, and it's worth $500k, you have a serious problem. Simply eliminating access to debt would cause all sorts of economic disruption for consumers, almost certainly outweighing the benefits in lower housing costs. And the other piece of the puzzle are zoning and codes. 100 years ago, if you had a plot of land, you could cut the wood and build a log cabin. Today, construction is $$$$$$$ because of inspections, licenses, insurance, and a crew of bonded / licensed workers. A log cabin would be illegal and result in fines.
smallpipe 1y ago
An industry of parasites, extracting money from people already down on their luck. Rats.
- gtowey 1y ago
  Because the easiest person to extract money from is someone with no other option. We are right back to feudalism.
  - ahajajakakaba 1y ago
    Usury is outlawed in many religions for good reason. This is a known problem with a known solution, but our society is run by billionaires who can put substantial capital to convincing the proles otherwise. Simply bring up inflation is wrong and not necessary (outside of disaster, etc) and the US government should control its own monetary policy and not the fed. You’ll get downvoted and/or fed arguments from economists (modern day priests) about how wrong you are. And yet the wealth gap keeps growing while we’re the most technologically advanced and efficient we’ve ever been.
    - eli_gottlieb 1y ago
      Deflation is objectively pro-usurer.
joshstrange 1y ago
Why did I have to scroll so far down in the comments to find someone revolted by this? I feel like all the comments about this (at least currently) are buying into the premise, taking these arguments at face value, and agreeing that BNPL is a _good_ thing, just insane.

tlonny 1y ago

The product (from the perspective of the consumer) _is_ relatively straightforward IMO. What isn't straightforward is accurately modelling the credit risk of the bonds when this class of debt is securitized (the meat of this article). Thus I don't think understanding this article is a prerequisite for making educated decisions re: BNPL.

tecleandor 1y ago

It's unhinged. > Is financing your lunch a sign of societal decay? Maybe, maybe not. Financing your lunch means you can't pay for your lunch. And then somebody comes to search profit in that. Yep, it's societal decay. Ah, but he draws the line at sports bets, he doesn't like that.

margalabargala 1y ago
> > Is financing your lunch a sign of societal decay? Maybe, maybe not. > Financing your lunch means you can't pay for your lunch. And then somebody comes to search profit in that. Yep, it's societal decay. Counterargument: almost always when I buy something, lunch or otherwise, I put it on a credit card, which I pay off always before the due date but essentially never on the same day I had the lunch. Viewed through the lens of a society that only paid up front in cash, what I do would be viewed as risky and irresponsible; but it is not. BNPL as it currently exists, in the form described in this article, is exploitative. But the American credit card system, which is the same sort of thing mildly rearranged, is far less exploitative.
- pseudo0 1y ago
  The credit card company still takes a 2-3% cut, which absolutely gets passed on to consumers. You get part of it back in the form of credit card rewards and services (eg. fraud protection, charge backs) but it's still a tax on everything. BNPL is worse, they take 5% and all you get is a small loan for a few weeks. Their whole business model relies on it being "free" for middle-class people who will pay back their loans, because the fee is hidden in the purchase price. This is an area where government regulation is actually required, all transaction fees should be disclosed and charged as a surcharge on the base purchase price, whether it's a credit card or BNPL, to provide a fair and competitive market for consumers and merchants.
  - poincaredisk 1y ago
    >This is an area where government regulation is actually required, all transaction fees should be disclosed and charged as a surcharge on the base purchase price, whether it's a credit card or BNPL Btw. in Europe the card thing was solved differently. First, most people use debit cards, not credit cards. Second, card fees are capped at 0.2% which makes it actually a cost saving measure (cash processing is not free).
    - bluedino 1y ago
      People use debit card in the USA as well
      - SOLAR_FIELDS 1y ago
        The difference is that in the States a cash discount is only rarely offered. It’s common in some areas (gasoline often costs less when you pay with debit, contractors and other similar small businesses will usually pass that 3% on to the consumer as well) but not others. Much more common is that the business charges the same for both (basically every direct to consumer retailer charges same for both debit and credit). The indirect result is that people with debit cards and cash payers are actually indirectly subsidizing credit card holders in the States. You’re actually operating at a disadvantage if you don’t funnel most of your spend through a credit card in the States
drivingmenuts 1y ago
Interesting, because sports betting is waaaay more voluntary than eating. Eating is voluntary, if only for short while.
- Spooky23 1y ago
  In the same sense as cigarettes. It’s a compulsive behavior.
sweeter 1y ago
He doesn't want to admit to being the cause of the rot, it makes him feel bad (but not bad enough to not do it lol)

scubbo 1y ago

Amen. It's been my experience that, for any innovation in financial technology, if you keep asking "and why is that beneficial?" for long enough, you will finally arrive (via tangents into "liquidity" and suchlike) at "it allows those with money to extract more money from those with less money".

r053bud 1y ago
Yes. That’s literally the economic system we have agreed upon in the United States States and continue to vote for.
blagie 1y ago
I don't know that's quite true. I've seen cases where it allows those with money to extract money from those with a lot of money too. Take this situation: Business A and business B are both doing well and competing with each other in a duopoly. a) No credit: Each business needs to be in the black, and competition is sustainable. b) Credit: Whichever business borrows more money to spend on buying customers is more competitive in the short term (which can lead to monopoly long-term). Both businesses run in the red are and brittle. In any downturn, tightening of credit, etc. both are liable to go under. This competition to raise increasing amount of money to be competitive (to increasing devaluation and/or debt makes for a pretty broken economy), and makes traditional businesses (which invest in R&D from profits) increasingly unsustainable. This even goes to government level. Historically, if e.g. two European powers were in a war, whomever could borrow more to buy weapons / hire mercenaries would have an advantage. Access to credit made for more costly, more deadly wars, and broken national economies. If neither side had access to credit, both sides would be strictly better off.
- losteric 1y ago
  For the same reason, I’d argue mortgages are a bad thing for consumers by creating this prisoners dilemma around debt.
  - blagie 1y ago
    It depends on the format of mortgages. There are parts of the US where home ownership is bottlenecked by land prices, where this is absolutely the case. And there are parts where it's bottlenecked by construction costs, where this is not the case. "Are a bad thing" is also complex. I would agree they WERE a bad thing when introduced. Today, there is a complex problem of how you unwind this phenomenon. If you invested your life savings plus $800k of debt into a $1M home, and it's worth $500k, you have a serious problem. Simply eliminating access to debt would cause all sorts of economic disruption for consumers, almost certainly outweighing the benefits in lower housing costs. And the other piece of the puzzle are zoning and codes. 100 years ago, if you had a plot of land, you could cut the wood and build a log cabin. Today, construction is $$$$$$$ because of inspections, licenses, insurance, and a crew of bonded / licensed workers. A log cabin would be illegal and result in fines.

smallpipe 1y ago

An industry of parasites, extracting money from people already down on their luck. Rats.

gtowey 1y ago
Because the easiest person to extract money from is someone with no other option. We are right back to feudalism.
- ahajajakakaba 1y ago
  Usury is outlawed in many religions for good reason. This is a known problem with a known solution, but our society is run by billionaires who can put substantial capital to convincing the proles otherwise. Simply bring up inflation is wrong and not necessary (outside of disaster, etc) and the US government should control its own monetary policy and not the fed. You’ll get downvoted and/or fed arguments from economists (modern day priests) about how wrong you are. And yet the wealth gap keeps growing while we’re the most technologically advanced and efficient we’ve ever been.
  - eli_gottlieb 1y ago
    Deflation is objectively pro-usurer.

joshstrange 1y ago

Why did I have to scroll so far down in the comments to find someone revolted by this? I feel like all the comments about this (at least currently) are buying into the premise, taking these arguments at face value, and agreeing that BNPL is a _good_ thing, just insane.