Why 'Buy Now, Pay Later' Is In Big Trouble...

The cancerous rise of BNPL firms like Klarna have long made my blood boil. They’re valueless to society and offer no value except creating a new standard for hyper consumerism and financial turmoil.

But a number of recently articles have shown that a number of these companies, most notably Klarna, are on the verge of serious trouble thanks to borrowers not being able to pay back their loans.

We now appear to be on the verge of an ‘08 financial crisis style collapse of micro-transactional lenders, and today, I’m going to explain exactly why that’s making me very, very happy.

The Rise of BNPL

BNPL (buy now pay later) is an industry that allows customers to borrow money to pay for everyday items, meaning you can spread the cost of something over time and pay off monthly instalments.

This started with… the mortgage. Houses became unaffordable in one payment, and so Buy Now Pay Later (because that’s all a mortgage is) was born. Decades later, and this increasingly profitable industry is everywhere.

BNPL is no different to a number of other financial industries where scummy pricks realise they can make money from money itself, by profiting off of growing consumerist tendencies and financial hardship amongst ordinary people. BNPL has thrived on trust. It’s as simple as that. These companies operate with the confidence that all the money they lend, is paid back. And in a micro-transactional environment, the risk is often low, and the profit high. Because remember…

They’re not lending money for mortgages. They’re lending money for pizzas.

But evidently, things seem to be taking a turn for a number of these companies, with late payments on the rise, putting a strain on their finances.

The problem is simple: they’ve lent money out to people who can’t afford to pay it back. That sounds awfully familiar, doesn’t it?

Admittedly on a smaller scale, the financed micro-transaction bubble is eerily similar the ‘08 housing crisis. You’re trying to make a profit by lending money out to people who can’t pay it back, and now you’re caught with your pants around your ankles.

It’s the big short, only… smaller. The only difference is that if these companies do fail, our entire financial system won’t go down with them.

At least… I hope they don’t.

How Klarna Makes Money

But, Klarna doesn’t charge interest on it’s loans… so how is it exploitative?

You’re right, they don’t make money through interest. It’s sneakier than that. Instead, they make money through commission.

They also make some money through interest on late fees, but this is insignificant compared to their merchant fees.

Every time someone buys something through Klarna (interest free monthly instalments) Klarna earn a small fee as commission.

The idea is that with their BNPL services, they’re broadening the target markets for businesses. Someone who chooses to pay with Klarna may not have been able to afford something outright. So, Klarna is paid commission assuming there wouldn’t have been a sale without their BNPL scheme.

Klarna even brag about their results on their website, to get more businesses to partner with them…

What is this except nothing more than exploitation of consumerist tendencies in a world where more and more people have no choice but to consume (spend) their way to happiness?

It’s great for them and their partners, but make no mistake my friend, this is bad for you.

The Dangers of BNPL

BNPL is creating a new standard for consumerism. In a micro transactional environment, if you can’t buy something outright, you shouldn’t be buying it.

That’s the reality. I don’t care if that makes you mad, or get all defensive because you use BNPL so often now you can’t stop. I’m saying it to protect you and your money. It’s the truth.

We’re on a long, slippery slope towards hyper consumerism where ordinary people are constantly paying for random accessories and junk months after they’ve been acquired.

Of course, you’re not losing out because you’re paying the same, just over a longer period of time. But the notion is that if you can’t pay it all on day 1, you’re setting a dangerous precedent for future spending.

If you can afford something outright, and you choose to spread the payments over time, that’s not an issue. But when you’re forking money out next month for a takeaway you had this month, it’s going to be…

• confusing until you realise what the payment is for.

• frustrating because you have less disposable income than you wish you had.

• setting a new standard for you spending money you don’t have.

Final Thoughts

All I’ll say is that with BNPL, tread carefully. They pull you in with interest free payments, and before you know it, you’re using BNPL more and more and more with no way out of this newly formed consumerist hellhole.

Companies like Klarna are making more and more through commission. Businesses are making more and more sales. So, who’s the big loser?

You. The sorry chump who’s now addicted to shopping because you can acquire goods at a fraction of the retail price, only to be forking out tons of your hard earned money month on month for shit you couldn’t afford in a traditional consumer environment.

If I had to describe BNPL in one analogy, I’d say it’s a wolf in sheep’s clothing. In other words, avoid it like it’s the plague.

Rot in hell, Klarna. Rot in hell.

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