Buy Now, Pay Later: Echoes of the 2008 Recession
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- Опубліковано 20 тра 2024
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Affirm, Klarna, and Afterpay - in just 5 years, these 3 companies have popularized a new form of consumer spending called Buy Now Pay Later. BNPL is a type of short-term unsecured personal loan where instead of paying the full price upfront at checkout, you can defer the cost of any item by splitting the payment into smaller installments over time. If you want to spread payments out over a longer period of time to make the installments even smaller, you’ll have to pay interest. And if you miss a payment using BNPL, there are penalties with late fees, collections, and lowered credit score.
What Klarna, Affirm, and Afterpay have done is they’ve broadened the purpose of short-term unsecured personal loans from large one-time essentials into everyday, impulse, and splurge purchases. They’ve made it easy for anyone to borrow money, simplifying a historically opaque, time-consuming process of applications and manual underwriting into a scalable UX that provides instant credit in just a few taps. Most of all, there’s instant gratification. With Affirm, Klarna, or Afterpay, you get your order delivered right away on or before your first payment.
Putting aside fundamentals, BNPL itself is controversial. To critics and regulators around the world, it promotes irresponsible spending and enables overconsumption. In this episode, we’ll explore the business model of BNPL, its eerie similarities to the 2008 subprime mortgage crisis, and why that matters now more than ever in the coming recession.
🎧 Audio Editing & Mixing Credits: Sonalf
0:00 The Rise of Buy Now, Pay Later
6:01 Generational Tipping Point
11:58 House of Mirrors
19:32 Castles in the Sky
24:12 The BNPL Flywheel
30:43 Of Their Own Accord
36:47 Boiling Frogs
0:00 The Rise of Buy Now, Pay Later
6:01 Generational Tipping Point
11:58 House of Mirrors
19:32 Castles in the Sky
24:12 The BNPL Flywheel
30:43 Of Their Own Accord
36:47 Boiling Frogs
modern… in this video you give some nods to video games.. is my favorite business channel a gamer !?? :o
I wish you covered scenarios involving returning the product.
Why not make them in-video timestamps?
From what source did you pull the "4 in 5 Americans" statistic at 2:51? Thank you, Modern!
Shilling masterworks huh
Just FYI Masterworks is not registered, licensed, or supervised as a broker dealer or investment advisor by the SEC, FIRNA, or any other financial regulatory authority according to their website
Yet another scam sponsor
Glad someone said something it’s kinda scummy when he said it and it didn’t even sound like an ad
This needs higher visibility. I was like "wtf why is he talking about art as a safe investment? Why are we talking about investing in a video about buy now pay later, #notfinancialadivce crap (which as of this comment, it's not written in either the pinned comment or the description that the sponser's company ISN'T financial advice, which would lead some people to think it IS financial advice).
@@Craigerry agree completely. 2 months later he's made no effort to qualify the sponsorship on this page. It's not a blunder, it's a demonstration that he's fully part of the problem in misleading poorer audiences for personal financial gain. As another comment requested, I'd very much like to see what % of his personal portfolio is in art. Is it significant risk, or will he be clear out of the way having made a profit when there's a crash/run and poor folks can't get their $ back out of it?
@@patray162 Funny that if you replaced "art" with "crypto" you'd still be describing the same thing 😂😂😂😂
That masterworks seguay was integrated in such a manipulative way. Do not do that again. The irony is lost on you.
yep
I’ve always wondered whether financial advice channels like these justify their shady sponsorships by telling themselves that people who actually listen to their videos wouldn’t buy these things… but they might also just not care 😂
Irony? Brother, we are watching an ENTERTAINMENT VIDEO ON UA-cam.
The team behind it gives 0 shits. I mostly use these as background noise. You are listening to a guy literally living off this system criticize the same system.
Since the internet was mass monetized everything is turning into the same C O N S U M E P R O D U C T slop.
Man that Masterworks ad pivot was horrible.
I hope that in future you're more careful to separate your normal analysis content from paid advertisements, because that felt a bit manipulative.
Your content is great! I wouldn't want to see it jeopardized by a few ad spots
Agreed. Wasn't a fan.
i look forward to the days when AI art programs can spit out replicas of whatever art you want supercheap, collapsing the art market, so we don't have to see these commercials anymore.
@@perfectallycromulent AI art already exists and it’s a super niche market… the art market will never die because there is a premium on scarcity and the human hand. besides, many of the highest price works are by old masters, and you can’t replicate (historical value and age) with with AI. masterworks and similar things are annoying because they treat art which should be a special expression of human creativity as just another commodity to invest in not much different then real estate or pork bellies
@@TheEagleEnigma you're acting like AI is a static thing. it's not. it's getting rapidly better. and don't pretend the art authentication process is sensible or logical. as AI gets better, the ability of experts to tell what is an AI copy and what is an original will disappear.
@@perfectallycromulent you are not an art buyer. It does not matter with AI if it is good or replica. all these classic paintings have a good number of immaculate replicas done by humans. and they existed for years. it does not matter how good AI gets. because AI existed for years too art restorers have been using it for years. but the art market has not died down. my guess is human made art will only increase in value in the coming years. and experts always know which is fake and which is not. they just don't look at the painting. they look at the paper, paint that were used and look behind the history and determine the fake from the real one. there is a whole chemical process to identify the fake from the real ones. how you suppose AI will replicate those things?
That segue into the sponsor was so smooth, it was straight up manipulative.
@@rubiksfaq9214 I watched the whole video, masterworks is exactly what any savvy individual would guess it is at face value.
What sponsor?
It's capitalism. He provides high quality educational content for free it is only fair that he monetizes it to the best of his ability. Hopefully anyone watching this kind of video knows to view that kind of company with skeptisicm
@@linear9185It is quite unethical to advertise a rather shaky and unproven financial Instrument. Especially since he claims a certain level of authority on the topic of finance.
And it is fine if your viewers are those that can avoid this type of ads. It gets annoying if done repeatedly, but just once? Why not.
I just hope those clueless viewers read comments though.
as someone who works customer support for klarna, pretty much everything you said regarding how they work was accurate and well researched. i just wish you covered the issue how streamlining and simplifying loans can be a malicious way of attracting people who don't really understand how loans work. i've had multiple people with issues regarding their payments/refunds who said they'll just uninstall the app and not pay; not realizing that will end up sending them to debt collection agencies which affects their credit score for like 7 years.
Pass 'Go', collect the cash, and just delete the app. Why didn't I think of that?
Yeah, There are some fintech companies offering advances on your paycheck that basically do work like that, just delete the app and forget about it because the companies offering it don't technically consider them loans in order to avoid regulation. That kind of blew up and I have to wonder if a lot of people assumed all these fintech companies operated the same way.
Gotta love public education.
Oh wow
@@Letsnotzumba wow
"America itself was founded on buy now pay later" priceless words
@Cyril Wilson Who asked?(I know it's a bot)
Yup and it was worth it
@@Gavanater7 wait until the glamour fade away then don't be shock at how ugly it is then.
I don't think that's accurate at all
I’m curious, in what way? Buy now, pay later is a very helpful tool to leverage other people’s resources for the gain of both parties. The services talked about in this video are problematic because of low barriers and hushed consequences for the purpose of buying unnecessary luxury goods. That last part is key. But if you are developing a country or business responsibly, credit and loans are reasonable tools that help the economy as a whole better utilize resources while also benefitting the loaner and loanee. It just is not a system to take lightly.
I remember seeing "buy now, pay later" options for pizza and groceries a few years back and that's about when I decided that we're ultimately screwed and there's no way the real economy is doing very well.
My apartment complex (which is a terrible slumlord one) now has it for rent.
These buy now pay later things don't necessarily exist because the economy isn't doing well. They exist because people are willing to spend beyond their meals. Even in an economy that's doing well, there's going to be at least some subset of people who will try to live beyond their means, even when they don't have to.
@@Bertinator-nm9ld There will always be people who spend money poorly, yes. However I don't think this applies to groceries for the most part, lol. Over half of US Americans could not pay an unexpected bill of over $1000 right now. So, either half of the country spends money poorly (which is not "some subset" but actually quite a lot) or the cost of living has become so high that the true economy is not doing well. The "true economy" is not as simple as looking at the S&P, and it can be measured in different ways, but my most accounts, it hasn't been doing well since 2021, and that's about when I started seeing these "Buy now, pay later" options on very basic purchases.
@@boofriggityhoo I see what you're saying, but I don't necessarily agree that the presence of buy now pay later on pizza has to be indicative of how the economy is going. It could be as simple as this, from the lenders perspective:
"It costs us basically nothing to offer our services on this product, in addition to all the other products we're active with, and maybe we'll a small handful of people who decide to use it."
That'd still be a net positive for the company, and a reason to offer the service, even if it's hypothetically barely being used. I don't think the fact that it exists necessarily indicates that anyone is using it.
Maybe they are using it! I just don't think we can conclude that, from the mere presence of the service. I think it would be present regardless of whether or not it gets used. After all, there's no real cost for the lender to offer it, so why not offer?
Pleaseeee- - Never sneak an Ad or Sponsorship in the video with no Disclaimer - other wise great video ❣️
Haha its also illegal to not show its an ad!! So- he really shouldnt do that again
Yeah that was a bit of a reputation killer for this channel. Especially because the product feels closely related to fin tech things which he is exposing the shady side of in the video
Yeah its fucking disgusting and outrageous to get people to gamble on illiquid pieces of shit like that on a financial responsibility channel
@@elvingearmasterirma7241 he literally said it was sponsored at the end of the ad
@@ShowtimeAtWaco That is still risky and misleading. A fair few people will leave when the main chunk of content ends. And there was nothing in his video description.
Look say what you want about it, how you feel about it.
The laws were made to make it absolutely clear there is a sponsor. And he can get in trouble if found lacking.
That's just how it is.
Buy Now, Broke Later
pay now
or die later
Faxxx☠️
Broke now, still broke later. Not unwise to purchase hard goods that bolster your resiliency to general instability while the government is destroying our purchasing power. Buy now pay later is an inlfation hedge for consumers.
Broke now, broke later
@@youtubesucks8024 i was gonna say broke now, broker later
The U.S. economy relies on ongoing credit and debt generation for sustenance. The Federal Reserve is expected to increase the money supply, leading to further debt accumulation for the average American. Meanwhile, foreign nations continue to desire the U.S. dollar, despite their own economies facing significant challenges, some even worse than that of the U.S. This situation raises concerns about who will ultimately bear the consequences of these economic dynamics.
They do say gold will crash in a liquidity crunch However, many of those holding precious metals are preparing for such an event. So they are unlikely to be forced sellers. The paper market would tank and hopefully collapse.
I wholeheartedly concur, which is why I appreciate giving an investment coach the power of decision-making. Given their specialized expertise and education, as well as the fact that each and every one of their skills is centered on harnessing risk for its asymmetrical potential and controlling it as a buffer against certain unfavorable developments, it is practically impossible for them to underperform. I have made over 1.5 million dollars working with an investment coach for more than two years.
this is all new to me, where do I find a fiduciary, can you recommend any?
Amber Dawn Brummit is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an email shortly.
That ad for Masterwork was pivoted into in a really covert manner. This blurs the line between the informative content the ads that sponsor the channel.
It put a rough blot on a thoughtful, interesting video.
I'm kind of disappointed you didn't mention (anywhere in the video) BNPL companies' one path to profitability.... SELLING USER DATA. As unethical as it sounds, BNPL businesses have a ton of valuable user data that they can probably sell and make a ton of money from. What's more valuable to companies and advertisers than knowing precisely what someone is willing to take out loans/a line of credit for...
The demand for such impulse buys is interesting. Usually after major economic downturns consumers will become more frugal, but it feels like we never hit that mindset after 2008
There's an interesting theory around consumer spending behavior during recessions. Contrary to what you'd think, consumer spending on indulgences tends to increase as people seek more short-term gratifying smaller luxury purchases to distract them from the ongoing economy worries (The Lipstick Effect)
I think what's interesting here is Buy Now Pay Later could potentially amplify the Lipstick Effect where consumers indulge using BNPL, so instead of buying $40 lipstick they buy a luxury item for $40 over 4 months, leading to greater overall spending and worse economic outcome for the consumer.
Don't forget it's been 14 years since '08
I'm not sure your feeling is supported by the data. And how much of this is "impulse buys" versus an understandable result of an inequitable legacy system or credit, declining real wages and increasing real costs?
It’s not necessarily impulse, but more than the economic downturn has meant people have nothing to save for. A mindset like: “Even if I live frugally, I’m never going to be able to buy my own home, so why not just enjoy my money instead of having it sit in the bank or in stocks? “
i feel like it made it worse because look at the current economy.. Everyone's broke because of the pandemic but consumerism is higher than ever
That was the smoothest, but also sneakiest, segway into an ad that I have seen in a UA-cam video... Not a fan of that.
Yeah for a second I did a double take like...is this actually an ad?
yeah, youtubers have no limit.
@@monicarenee7949 of course it is
what ad? man this new art piece i got is flames ong
agreed… sneaky and felt like there should have been more disclosure that he was paid to peddle art investments before the very last line …
I took a temporary job over the Christmas period last year in retail and the thing that ended up surprising me the most was just how many people were paying with these services for very very small purchases. $20 of Christmas decorations? BNPL it, $15 worth of chocolates? BNPL it. Even with zero interest or whatever marketing spin they give it, it seems weird to me to even bother taking out a loan for such a small amount.
Ikr
I do that a lot, it helps me survive till the next paycheck.
@@Karma_MiguelThen it digs you in a deeper hole. Reminds me of how people use overdraft to help them make it to the next month but they’re in overdraft every month. Just get out of it and budget according to your bank balance after payday. I’m a minimum wage worker btw.
Just for the heck if it😂 you can gain interest on the $10 for a couple of weeks
A year later, that is still very much the case. Right before Thanksgiving here in the US, I bought some music off of Bandcamp. About $50 or so worth and just used PayPal to pay for it. PayPal offered to split that into 4 payments! Personally, I think that if you need to split a $50 bill for buying some music into four payments, you probably should not be buying music. I will admit it is easy for me to say that as $50 is like nothing to me, but still....
Love the video. Found the advert disingenuous. You're smart enough to know art is the definition of speculative.
Honestly the commission aspect of the scheme is the the most terrifying part as it cuts into the margins of the merchant. This means responsible buyers who can afford the things they are purchasing will have to compete with irresponsible consumers backed by financial institutions. This will give merchants the false notion that consumers have a higher purchasing power, thereby raising prices, where all the consumers suffer
Merchants already pay similar fees to credit card companies for transaction processing. So gotta disagree with you and go with the securitization as the scariest part. Hopefully these securities are not growing exponentially and making their way onto the balance sheets of disparate industries all over the world like last time.
That's why I only use Klarna on discount stores with throwaway accounts with discount coupon codes.
Dog eat dog.
@@goste4 Almost all loans are securitized, or at least traded to other banks/investors. Securitization is not the enemy in itself, regulations have made it so usually originators have to keep a percentage of each loan on their balance sheet to encourage sustainable underwriting. Not sure how these will be impacted by these regulations, as they are a fairly novel financial product and may not fit under the existing regulatory framework, not to mention these loans are a tiny fraction of the economy relative to mortgages.
@@kyle_iverson I never said securitization was “an enemy”, I said it was the scariest part for the reason I laid out. However, I do think that securitization as a principle introduces perverse incentives and increased complexity into a financial system, and I’m not convinced that it provides much benefit to wider society in return other than maybe marginally lower interest rates (obviously originators see massive benefit).
@@goste4 That's fair, though I think that the benefits to the system are quite significant when it comes to flexibility, and ability to manage risk, which ultimately benefits consumers through stability, and lower rates as you mentioned.
There's essentially two mindsets when it comes to non-essential purchases: "I saved 30% because the store was having a sale" OR "I lost 70% because the store was having a sale". The danger in BNPL, as with credit cards, is that it conditions you toward the irresponsible spending habits of the former. I know because I do it. I buy plenty of things with my credit card that I CAN afford within the next 30 days that I CAN'T afford right now with the cash I have on hand (considering other obligations). I know I wouldn't make some of those purchases if that money had to leave my account today. I can make the justification "I'l pay it off and get some points so I'm really coming out ahead" but that is false because I'm not considering the opportunity cost (savings/investment) had I not spent the money in the first place. It's up to each person to decide on what works for them. I just wish everyone was equipped with enough financial knowledge to consider their choices fully. Services that provide short-term, unsecured credit have an incentive to prevent that from happening because they profit big when consumers spend irresponsibly.
Thanks for sharing your experience.
BNPL is not just a false economy, it also conditions you away from responsible money management and deferred gratification, and towards impulse spending.
I had your same behavior and was also carrying a balance every month on 3 CCs. I closed all my CC accounts and now I only buy stuff if I have the money. And the points, it's all a farce, all part of the game to get you in an endless spending cycle.
@@darkrulier the points. Dear God the points.
What the sale is actually doing is pulling that spending forward. So it would be "I decided to buy winter clothes at the spring sale rather than wait for fall when I'll have to pay full price"
I’m a millennial and my mom opened up my first credit card that she used and kept until I was responsible enough and a job. I was around 21 when she finally gave them to me and I had over 670 credit score which was awesome! I feel like all parents should encourage fiscal responsibility onto their kids
Yeah, my mom did the same. Now I have a slightly better credit history (I opened more cards on my own and closed a few others) than most people my age and a perfect score.
yup. you can add anyone starting at 13 to your credit card to build credit history. and it smart. they’ll have 9 years of credit history by 22 which will put them ahead of anyone when it’s time to purchase a house, car, apartment, etc.
But that wasn’t teaching you or encouraging your responsibility, she literally gave you the card after she did it for you. My mom is doing the same thing and I wouldn’t consider that encouraging fiscal responsibility, she does, but her making sure I have good credit isn’t inherently doing that. So I think you want all parents to make sure their kids have good credit and encourage fiscal responsibility.
@@41052 I had to prove myself in order to even be able to see those cards. I was working, going to school, paying my own rent and bills lol. She just wanted me to have credit so I could do those things lol ( like rent an apartment)
@@41052dawg that’s not what she meant. It’s not doing it for them, it’s letting them start off with a reasonable credit history so they don’t have to dig themselves out of a hole. The mom teaching her daughter the financial responsibility was totally separate from her taking a credit card out in the daughters name
The truth is a lot of younger people have a sense of hopelessness about their future for lots of reasons. They are trying to fill the void with material things which gives them a short-term boost of dopamine but also saddles them with potentially unpayable debt, thus making their mood and situation worse. It is a sad situation.
@Cecilia Cole That is a great mindset to have. More people should think like that.
I love how "pay later" companies are basically reinventing normal banks. In order to become profitable they're inevitably going to adopt the same practices that drove customers from traditional banks in the first place. They'll become some mix of a bank, credit card, and pay-day loan company.
From personal experience at a company that accepts Affirm payments from customers, there is no downside for the retailer. Despite what this video says, for us the merchant fees are LOWER than traditional credit card companies and we don't pay a different amount depending on the terms. Affirm does have the option of eating some of the financing cost to offer "interest free" for longer terms, but that is up to the merchant to use as a sales tactic.
Also, the Masterworks sponsorship in this video is a bit unethical. It isn't obviously identified as a sponsorship placement and is presented as financial advice in a video about personal finance.
My banks credit card just got this feature, allows me to turn any payment over $100 into being payed over 6 months for 0% interest.
@@bhaalgorn Which card is that?
@@ewicky visa momentum infinite with scotiabank
@@bhaalgorn Interesting... It looks like they charge a monthly fee for this, similar to Amex Plan It and other competitors. It isn't really avoiding interest, it is just charging for it in a different way. It's assessed as a fixed fee instead of a percentage.
In other words, you pay more than the original $100 over the term of the payments.
@Erik Wickstrom I don't pay a fee at all. Infact I have no yearly fee either since I maintain a minimum balance in my chequings account, among other benefits
We live in a world where it is painfully easy to spend money, great video
spend money we don't have* specifically
@@karaliabrennan594 gotta keep people spending, even when they have nothing left, because otherwise the wheels of commerce sieze up. debt is a handly solution because it means they don't have to pay a liveable wage, or cap bills at a reasonable level, etc.
@@0lionheart i know, it's so stupid
That's a really smooth transition to a barely declared sponsor segment.
He quite literally thanked them for sponsoring the video. What more do you need?
I had never paid attention to these apps, I've heard about them here and there but I never realized how utterly predatory their business model is. The idea of giving leverage to SMALL purchases is just asking for broke people with no self-control to roll up all their spending and fuck themselves over with unpayable debt
But at the end of the day, it's the consumers fault. It is very predatory though.
@@user-jh5uc2ss1l That's exactly what they'll use as an excuse.
They are literary taking advantage of vulnerable people.
That would be something very unattractive as a human to do (take advantage of someone), I hope won't make moral exceptions just because it's a company that's doing it and not a person.
(And on the other side, tobac company's do still exist, so it's been a businesses-model for long to exploit people.)
I once saw an ad offering credit to order KFC off Uber eats. KFC. People are going into debt over KFC. My God. I'm sorry but if you don't even have £15 in cash to buy fast food with, the last thing you should be doing is going into debt.
@@Candyrock15 just starve to death then if u got no money. How dare u want some fried chicken that's like £8 a meal max
If you fuck yourself over with something like this you need actual help with basic life functioning. Auto loans, home loans, credit cards, student loans etc are waaaaaaay more predatory than this. Somebody splitting up the cost of a pair of $200 Jordans isn't going to fuck up anybody's life lol. It's also, guess what, completely optional to use!
You never cease to surprise me with the topics you choose. Never entirely out of left field, always something that has been in the back of my mind for a while, yet not present enough to do my own deep dive on. Fantastic work!
Wanted to say something similar , so I liked your comment I mean , really, he just never cease to surprise us and amaze us ..Good Luck sir ! and keep the good work !!
Absolutely. I have often wondered about the business model behind these BNPL companies, but the furthest I got was a quick google search which returned an answer of "late fees." A deep dive like this that explored interest, securitization of loans, and merchant fees was exactly the explainer I needed.
Lol this comment was my thought exactly 10 seconds into the video during the “abstract” 😂😅 we’re probably soul mates Dan lmao
This is precisely why personal credit management should be mandatory education in every middle and high school in the country. People don't understand how credit works and there are so many common misconceptions about credit that cripple them later
What’s interesting is that BNPL is just a common Swedish concept of “faktura”, i.e. an invoice with a months payment time. Klarna became a thing because they are just an extension of this.
In Sweden, credit cards are simply not that common. With the rise of online merchants, the invoice was the go to choice, because that way you get your product before your pay. It gave people confidence.
The problem is that with invoices, the merchants take the risk. With Klarna, the merchants avoid all risk. So they naturally managed to explode in Sweden, and beyond.
But it’s very very different to operate in Sweden, where public information laws combined with government registration laws makes it almost impossible to hide unpaid debts, it’s another thing entirely in the US.
It's funny how similar AND different Sweden is from Norway.
I think here credit cards are uncommon outside of company credit cards, but account credit is very common.
So I have a line of credit at my account, so my debit card *can* go into the red.
It's not something I think of day to day, but it's funny how different AND similar it is to credit cards.
When online shopping became a thing here, VISA was supported by everyone, and most every debit card is also a visa card.
@@HrHaakon Same in Germany. Line of credit for an account is the norm. Usually it is 2 or 3 times your monthly income (if you don't have really bad credit scores) but on request and with a good credit score it also can go higher. You can even go over this line of credit - but then interest rates get really high.
I honestly think a lot of this just comes down to marketing and preying on people who don't know how credit cards/these loans work. These are effectively revolving lines of credit on a payment network, just like a credit card, but with really limited retailers. You get no interest for 6 weeks, but a credit card gets you zero interest for 4 weeks, which most people probably don't realize. Credit cards also give cash back, and other perks on top of being a good way to build credit vs BNPL which is not reported to credit bureaus. Not saying that CCs are unequivocally better, but these loans seem to be effectively the same as a credit card, just under a new name and with fewer benefits, albeit also with some unique upsides.
As far as I understand, the payments are amortized. So it's not exactly as trappy as getting people to sign up for credit cards which are revolving. Since it's amortized, you can calculate whether it's worth it or not at a given interest rate to use financing. Also, people looking to start a cottage business on Etsy or something similar could use one of these loans for equipment such as an ice cream machine, cart, etc., basically allowing microlending to become more common in the U.S.; not everyone would use these loans to generate revenue, but it's not a bad thing if people do. I did.
This is worse than credit cards. There doesn't seem to be any analysis done of whether the borrower has the ability to repay the loan. I guess that's why they keep the initial loans small. ModernMBA asks who should bear the risk of default. As always, it's the bank holding the pursestrings. Guess they just don't know how to say no.
actually, it's that you have 4-8 weeks to pay credit cards, counting from date of purchase to closing date, because you have to get the monthly bill first and can pay that within a month.
They are definitely preying on people who are maybe having credit troubles and make impulse buys, the websites these services pop up on prove this: Expedia, Dyson, Saks, Reverb, Lululemon, Best Buy, Ebay and Apple. Just to name a few.
Here in Brazil it's very common, almost everybody does, kind a part of our "purchase culture".
Yeah, its been around for decades.
I was searching for a comment from someone from Brazil. Buy now pay later is embedded in our culture for decades.
Silêncio, os gringos estão descobrindo o parcelamento
Banks will either end up offering buy now pay later on mass or acquiring these companies, it just doesn’t make economic sense to add another party to an already razor thin margin business. Keep up the great content!
Maybe like a Zelle feature
It's a great tool for those that are disciplined enough to control their spending and finances. What I find interesting is how no one wants to talk about how toxic subscription services are when they don't allow you to own them.
You're not around artists too much, are you? Every time Adobe changes something about subscriptions, and of course the time when CSP started the subscription model, there is this huge debate about it.
I feel like a lot of people talk about that but ok lol
If it's tech software, you technically do not own the product, you are granted a license.
It's lame. So 🏴☠️🏴☠️🏴☠️🏴☠️🏴☠️ as much as possible 👍
I’m confused why someone making a video on buy now, pay later, would be covering subscription services instead
@@drinkingrobot2252why do you think it's lame? it's what allows companies to continue developing products
Could this trend become problematic for those using these payment methods down the road? Instead of utilizing a credit card and building a solid credit score, when it comes time to mortgage a house or take out loans for whatever reason, there will be hardly any established credit history to analyze. Could this then lead to creditors lowering their lending standards, taking on riskier borrowers who have a higher chance of defaulting on their loans? Seems like a slippery slope.
The CFPB recently announced that BNPL should work like credit cards for credit scores, which would I guess fix that problem.
@@FireEverLiving We’ll have to wait and see if that actually gets implemented. Would BNPL make short term credit loans obsolete? Will credit lenders be forced to offer lower interest rates, if not 0% interest rates to compete? Either way, the competition could surely shake up the industry. I’ll be paying close attention to how this situation continues to develop.
@@FireEverLiving do you think over time klarna will report to the credit bureaus?
I agree what will happen when cost of living becomes so high BNPL is required for some people
@@noahpulaski6800 - That’s actually a very intriguing and interesting question! I’m curious about the same thing.
I like that you use personal experiences in your videos
Step 1. Lend to people who have no business being lent to
Step 2. Securitize those loans and sell them to counterparties
Step 3. 3rd and 4th parties take those loans and begin to gamble on them
Once we get to step 3 it is, quite literally, the 2008 paradigm again
It's not, at all. The 2008 housing crisis was 200x worse. "Literally".
The average BNPL loan is $833. The median house price during the 2008 crisis was $200k. BNPL isn't going to collapse the economy. That being said, it is a symptom of something bad.
@@xNatheeeGamer isn’t there also a housing bubble that’s about to burst? I’m by no means an economist but everyone’s saying this recession is going to be 100 times worse than 2008.
Honestly as a person who comes from a country where debit cards are the norm and credit cards the exception, my main takeaway is that credit score is most likely a scam created by banks to incentivise you to pay everything through credit, thus increasing their profits.
Honestly, thank you for making this video as it reminded me to check the credit card I don't often use and there was a small amount of outstanding interest that could've grown more if I hadn't realised
I always ask myself: who the heck buys consumer luxury (clothes) with Klarna? We are even talking about brands like H&M.
americans
It's all to get people with low impulse control to spend money they clearly can't afford to lose, pretty devious if you ask me
There’s an expensive instant noodles brand that let’s you pay with affirm 💀
I hate buying clothes. Smh. I don't like spending $20 for a shirt.
oh veh shut them down
I have to give you credit, that was the smoothest transition into a sponsor ad I've ever seen. Didn't even realize we switched to an ad until ~30 seconds in...
I knew it right away. Another scam with art
Loving the mix of research and literal experience in showing us your journey with credit. I lucked out in being able to latch onto my parent's credit, so I've never faced those same struggles but this really helped me understand the BNPL industry in a new perspective.
Words don’t do justice to just how high quality your content is. Thank you for your effort!
But did ypu invest in masterworks tho gotta invest that money bro 🤣
I'm nothing of a business person but these videos are so entertaining and enlightening. Thank you for the effort you put into your videos
Accumulating interest for minimal payments for longer time for whats most likely CLOTHES online is absolutely fucking crazy
Really enjoyed this video but the masterworks ad segway was not cool. As a marketer myself I can appreciate the seamless transition, but I am also scared of how you went from a completely factual coverage to peddling an alternative investment as if it was just a known piece of info. Undisclosed sponsorships done in this manner are unethical and will hurt the whole industry if they arent better disclosed
As a US consumer (that pays off each month) I love to use credit cards because of the rebates and signup bonus they give me.
That free money comes from the poor who fail to make payments. It's also reflected in increasing prices to pay for higher transaction fees.
@@johndoe1646 nope, it comes from the commissions/fees received by retailers to the credit card companies
@@good-tn9sr ummm, that "nope" is a bit of a hard stance because you're both right -- Any income credit card companies make from interest or fees is now in the pool of funds that can go to customers for perks.
You pay for them indirectly, but you don't foot the whole bill which is the genius part of it. It's spread across all items as a 2-5% commission the retailer has to pay. In essence, everything gets a little bit more expensive than if you had paid cash, but since you don't get a discount for paying cash you essentially get the original cost of the item with the rebates. I've been to many not tiny stores that straight up don't accept credit cards because of this. It's a complicated system.
There's also the stupid high interest rates and late fees that overwhelmingly hits the poor, but I don't think the bulk of the rebates and bonuses come from there.
@@andypeters3011 it’s all separated though and CC companies make around 3% on average from each transaction which is more than the average cash back rewards the consumers tap into.
I recently used Klarna to buy $204 for 4 Ralph Lauren shirts. I paid $51 once every 2 weeks over the course of 8 weeks, and it was all said and done with no additional interest. I think there are a few scenarios where it makes a lot of sense.
Obviously, adding $100/month to my DTI with decent income isn’t the end of the world, but if I chose to finance a $400 purchase over 8 weeks, or something higher, it could be detrimental to my cash flow.
For people who understand their obligations and can finance responsibly, it could be a great tool. But for most American consumers, it can get dangerous fast.
It makes sense to you but not for the bnpl companies. They have to pay the $200 upfront to Ralph Lauren and collect the money back over 8 weeks. With 0 interest rate, the business model is essentially a cash flow draining machine.
If you're financially responsible, why do you need a loan to pay for a couple shirts? Either you have the money on hand to begin with, or you could save it up quickly without incurring the risk of late fees if an emergency comes up. Perhaps my definition of financially responsible differs from yours, but to me financial responsibility means not going into debt for trifles.
@@RF-xr7sx I do it cause even though I have way more than enough seeing a $200 chunk at once leave the bank hurts me more than 4 $50 chunks every couple of weeks or so
@@yeastarly4268 This interest free loan brought to you by increased merchant fees and investors that are apparently financially illiterate =D
I agree with you. Anytime I use bnpl I have more than enough money to afford the purchase. I just do it because I don’t want to see a chunk come out. It’s really just a psychological thing for me. I can more than afford every purchase I make and I’m sure I’m not the only one using bnpl this way.
At first I didn't see the problem. I kept thinking 'oh how innovative of these start ups' and how more customer-friendly they seemed than regular banks. Then we got to 17:10 and it hit me like a recession freight train. The echoes of all the recessions I've been through are right there.
Another fantastic video! Thanks again!
ETA- and now at the 31ish mark, that's just a recipe for a financial collapse. No wonder the evaluations tanked.
Just remember, ModernMBA now gets to claim his hair dryer and sneakers as business expenses. Well done.
I can't believe how high quality your content is, you deserve way more subs. Keep the good work up
Maybe actually watch it before dropping praises.
@@iHyders Explain.
@@yourmom4398 The video is 40 minutes long, the comment is posted about 10 minutes after the video is published publicly. The person who replied hasn't watched even 25% of the video before commenting about how good it is.
@@iHyders U upset?
Also make sure to be careful of supporting creators that shill for Masterwork; see the Plain Bagel's breakdown of Masterwork, definitely makes you think twice
As someone who works in this industry and develops these products I can say that I have had the same shrinking feeling that this all is leading to a downfall. Only time will tell what's gonna happen
The most fucked up thing is, one person's overconsumption and overspending is another person's job (anywhere in the world) continue existing
I use buy now, pay later a lot as its hard for me to get accepted for a traditional credit card. I always make sure to use the credit responsibly and only purchase what I know I can pay off once pay day comes around. I think buy now, pay later is a great alternative but for those who are unable to manage their finances and ensure they don't enter into debt, it will just cause problems in the future.
Unless you are 18. You shouldn’t be struggling to get accepted for credit cards. If you can’t get accepted for a credit card you probably shouldn’t use buy now pay later to buy things that truly aren’t necessities.
You not getting approved for credit cards just means you are risky to lend to. This is based on your previous credit history which you are responsible for.
@Buzás András secured credit is your answer then. I dont think they deny anyone for secured cards.
If you do not have the money now, you will not have it later …
I learned this the hard way, but it was a good life lesson
Your statement is too universal. By your logic mortgages and business loans for investments shouldn't be done either
Scenario: one doesn't have $100 right exact now. Can pay off 25 a week though. Will have whole sum in 6 weeks.
Interesting that none of them saw the monetisation of their product discovery capabilities. They can based on their user analysis decide to actively recommend less well-known products to their users and thus be able to charge not only higher commissions but also charge fee for product recommendation (I.e. advertising fee).
ha! spot on
Of course they do, every-time someone goes to a shopping site and makes a purchase through their apps they also get a commission. Companies pay for that kind of referral and that's why websites like Rakuten exist
Interesting to see how it works in other countries
I live in Brazil and here all stores offer you the possibility to pay in 3x or even 6x without extra fees
Yeah, because the general population is so poor, it becomes necessary to make a sale. That is not a good thing.
@@sthlcrx I am not judging if it is good or bad
I am just comparing a cultural difference between countries
Even rich people in brazil pay in installments
I have paid a "Garota de Programa" in 3 installments.
Indonesian has these too, plus BNPL
This channel is honestly gold. A godsend that it is maintained free and an open source of knowledge for ppl. Also, that was the smoothest ad read ever.
Thank you for the kind words and generosity.
Alright smooth ad transition but viewers plz just go buy broadly diversified low cost index etfs... market down = market discounted for your future gain$
I think in case of India many customer filed complaints against BNPL in RBI because
1. They were harassing customers over late fees by gathering their contacts through their app and contacting their relatives and talk shit about them.
2. They change interest rate without informing customer example if you bought shoes and opted for let say 12% interest rate they might change it to 20%.
3. They use prepaid card to distribute loans which is not legal in India
4. They don't notify loans to credit rating agencies but might only notify loans that gone bad
The 4th point is normal throughout the world . Yhat is acceptable
The 1st point you mentioned is horrible , but remember in india , there are so many people in our country who will intentionally pay late or even never pay the loan .
Also the police , banks and courts are not very helpful in these matter since they either dont want to trouble people or they are extremely slow in the getting the person in paying back.
@@johnsamuel1999 I really don't think that everybody intentionally pay late or don't want to. Sometime bad things happens like corona. Every Indian private and public bank have a process in place in case of delayed payment as per RBI guidelines. But for BNPL there are no regulatory framework present yet. RBI is building it and might take survey for public opinion.
@@akshaybele9806 true
This is like the lay-a-way system from the 80's and 90's my family use to utilize when buying large purchases like furniture and winter coats from big box stores and local mom and pops. The downfall was you needed down payment and needed to pay x amount of installments before getting your purchase and if you miss a week your stuff is in danger of going back on the selling floor. Working in retail in the 2010's until 2022 I always wondered why the practice fell out of favor with businesses.
Love the insane amount of works and times you put into these videos mate, especially the long ones. Keep up the good work.
The financial system has been artificially pumped for over a decade to ensure big pockets were lined; and now those same hands will make a fortune in the largest transfer of wealth in human history by shorting it on the way down. Inflation does have a roll, but that's to keep everyone panicked, and focused on their bills and expenses, rather than focus on the capital crimes of politicians and corporations,I'm still at a crossroads deciding if to liquidate my $338k stock portfolio, what’s the best way to take advantage of this bear market??
Find stocks with yields that exceed the market and stocks that, at the very least, follow the long-term market trend. However, you should get guidance from a financial advisor if you want to create a successful long-term plan...
Even though there will probably be more pain in the future, investors should look for stocks like Royal Philips NV and Alstom SA that have been sufficiently battered down to be a bargain or get a great portfolio manager.
Most times people with little or no knowledge of the stock market try investing by themselves. It once happened to me, then I learned my lesson and contacted a US-based finance consultant by name “ Vivian Carol Gioia” and everything changed. In the first quarter of this year i made $370k and counting.
@@Dannyholt33 i really need help with the way the market is going lately, how do i find the lady you just mentioned? i hope she might be able to provide assist
Vivian has a web page, look her up you'll find her, she's good at what she does and i believe she'd be of great assistance
I've used Klarna once, and only once. It was for a $20 Tshirt. They charged me $5 the first month, $0.30 the second month, $12 the third month, and $2.70 the fourth month. I was so glad I didn't pay for something bigger than a Tshirt, because imagine if they charged that way for something that was $1000? The random changes in the charges could have absolutely been ruinous. I'll never use it again. I'll just stick to not buying things that I can't pay for up front.
Makes your mind run wild how crazy this simple payment option is. I haven’t watched all of your videos but this I I think is the best video yet
So glad you covered this. These companies have always worried me but I hadn’t looked into in myself.
You must have taken a nap before creating this masterful video because you sure as heck did ALL 8.5 x 11 inches of every homework page to pull this much finite, detailed project together. Great job!
A wise person once said "If you can't buy two of it, you can't afford it."
that's a stupid person, not a wise person. most people who have owned homes throughout human history could not buy two, yet somehow they could afford one. i guess poor people don't need cars in your conception of the universe as well, or health insurance plans, or anything else that is really expensive for them.
I'd love to hear an explanation because that quote makes no sense to me. The other commentor makes a good point
@@DylanJo123 OP's comment can also be interpreted as: "If you can't afford to buy another for replacement or can't think of how you'll buy parts for maintenance/repair, then you can't afford it..."
The later, regarding maintenance/repair is understanding that when you buy components or parts/refills of a product you could say you'll be slowly buying that same product twice...
I know it's a stretch to interpretate OP's comment like this tho. To each their own.
That person sound lame.
Growing up if something wasn’t a necessity I was taught that you should be able to buy 5 of something to truly afford it. There is a big difference in having enough money to buy something vs being able to afford it.
I always wondered how people afford all these unnecessary luxury items in their lives, and the answer is that they can't
Ironically, underneath this video in my feed was an ad from the USDA that reads in big letters: ZERO DOWN PAYMENT WITH A USDA LOAN
Body text:
“Bad credit doesn’t automatically rule out buying a home. There are other options”
Very excited for this video!
I got credit cards when I went to college because my mom swore it was something that would help me build my credit score. Cut to nearly 10 years later and my credit score has hovered around 530 since then with very little fluctuation (I actually think someone somewhere has a card in my name because I’ve made a point to pay off and close all the original cards in an effort to manage them and bring it up, but I digress).
There have been several times since sticking almost entirely to debit where I’ve seen that Klarna/Affirm/AfterPay button on a website I’m window shopping on and I can’t deny that I’ve felt the impulse to do it because “I can afford that,” but luckily with my weird credit card experience I haven’t taken the bait for fear of falling into a trap.
I did the same thing although it's only been 6 years. Credit score is in the 700's. Something is definitely wrong with yours if you paid everything on time.
@@NiSE_Rafter yeah unfortunately I looked at a more detailed breakdown and it says I have 6 lines of credit I’m more than a month late on, so to me that screams someone taking credit cards out in my name. Like if it was 1 I could see that being a me thing, but 6 is something else lmao
not sure why you're laughing since you have a serious problem
@@krzzzy19 Not sure why you're condescending when making light of an unfortunate situation is a common way to come to terms with it.
While obviously it's a good idea to close the cards if there was suspicion of fraud, but closing lines of credit can negatively affect your score. Even if you're not using the card it's still a good idea to keep it active so that you have old lines of credit. (Unless there's an annual fee, then it's not worth to keep if you're not using it)
I interviewed for Affirm last year for an engineering job. The hiring manager was condescending as hell and tried to say that JavaScript could have race conditions despite being single threaded (true only with many asterisks), used my inability to understand his point as a justification for not hiring me.
Considering how morally bankrupt that the short term credit industry is, as well as the how much AFRM got stomped in the year since, I’m pretty happy not to have gotten a job there.
I’m a older millennial, 37, and the young millennial using alternative banking and credit is nothing something I feel older millennials do. Almost all of my millennial friends around my age use traditional banking, with credit cards, ideally, AMEX gold and platinum.
It comes down to economic class though. People with an Amex Platinum have stable, well paying careers and no debt. If you still have student loans and are underemployed at Starbucks, you don't have an Amex Platinum.
Last time I checked, Amex Platinum charges 16%+ on their Pay-Over-Time. I fail to see how that's better than those no-interest "alternative credit" BNPLs.
I read that as "APMEX gold and platinum" and was like "dude your friends are based AF" lol.
Then I realized it said AMEX and not APMEX.
Anyway though, yeah APMEX = American Precious Metals Exchange. It's like the largest online precious metals dealer.
Your content is so interesting. I'm being entertained and learning new stuff about how the world works
"I don't have enough money, but I can have it now anyway?? GREAT!"
Later: "I'm deeply in debt, who could see this coming" 😱
The strangest part to me is because here in Brazil this way of payment is the most normal way to pay things with credit cards, we use “parcelamento” for everything. I work in a clothing store, and it is so common that every time there is a customer asking to "pay later" the payment in amounts of 3$ (15R$), 10$ (15R$), but where I work the fees for payment machines are expensive, so we only accept payments above 20$ (100R$) to cover the price of fees ... When Apple Pay later arrived I was shocked how a means of payment so common for me is not even considered for most Americans.
This is really, fundamentally not any different than credit cards or traditional loans. They are all about borrowing money. Corp. always wins.
Yep they just rebranded lol.
It's just credit cards / pay-day loans with a new coat of paint. Not having compound interest or late fees (in Affirm's case) is a difference that I'm sure will be dropped eventually in order to become profitable.
Actually these usually have no interest. It’s more like layaway.
They way money is borrowed and for what purpose does matter tho, can't put that all in one
@@DebraJohnson you should never be paying interest on your credit card either
Personally, I've managed to take advantage of the Buy Now, Pay Later craze by taking the money I would have spent and investing it into treasury bills to earn a little extra money on the side. This only works on the 0% interest loans though.
Smart lol
What.
lol treasury bills
I thought that the whole point was to take interest free loan, pay it using credit card... while earning some interest rates as one really could afford some cheap product with cash if needed.
Imagine taking out a loan, to then loan the government. Absolutely hilarious. If you’re going to use leverage and invest at least do it for a 12% gain instead of a measly 1.5% or whatever a treasury bill is paying out right now.
Good and informative video, however I find it really an confusing insertion of the "Masterwork" promotion in the middle of the script. Prob better to put it in the front or end...
i'm so proud of you honestly your speaking voice has improved so vastly in terms of its structural soundness... is it awkward to be proud of someone you don't personally know... i don't know... but i am. keep it up.
Thank you! You are very kind.
"virtual cards, they allow you to spend money wherever and have to pay it back in installments in the form of a loan"
So.... Silicon Valley invented the Credit Card
But they're even more elusive than credit cards
Amazing analysis and overall piece of content, glad to discover your channel!
That is the MEANEST shift into a commercial I have ever experienced!
wtf that ad came out of nowhere and wasn't even properly stated as an ad or "sponsor" at the end
15:20 I've gotten this far and he has not yet mentioned Paypal.
What's funny about the "Retailer's Arms Race" is that there is another buy now pay later system in the game. Paypal.
Paypal Pay in 4 thing started after Afterpay and others, but most online retailers already use Paypal-especially small businesses. Pay in 4 is just automatically available to them and most people already have a Paypal account.
I've just added a random Dyson product to my cart and went to pay with Paypal and the Pay in 4 option was available even though Dyson has exclusively partnered with Affirm. No I didn't follow through with the purchase. I just wanted to see if it was an option, and it was.
PayPal's PayIn4 option is superior to them all. They charge no interest, zero. And they also have no late fees for missed payments. It can be useful. I feel like he left it out because it's not actually very predatory.
we also have these pay later schemes in shopping apps in SEA. used it once for a small value object to test it out. while i dont have to pay extra because i picked the pay in full the next month it does scare me due to how easy it was to process. ive been using debit/direct transfer because that way i can actually see when i started to overspend
This channel is absolutely awesome! Extremely high value content. Keep up the good work!
One of the best channels on UA-cam right now. Hands down. They've done studies.
I’m getting a better more thorough education for free from UA-cam than I did in college with 6 figure debt. That’s deflation baby! ❤❤❤
As someone who works in the BNPL space, I applaud this video and appreciate the detailed analysis.
Its freaky how many people I know use the buy now pay later method. I already use my credit card sparingly, mainly on occasion for gas, groceries or if i get takeout, I would never use it for non essentials. It already felt kind of obvious these were predatory, thank you for basically confirming with more info than I could ever really know how to explain
My main takeaway from this video is that the smart move is buying a bunch of stuff with Klarna and then waiting for them to go out of business so they never take any payments from you
As a comment above stated, it’ll eventually go to a collection agency then effecting your credit score. I don’t see these buy-now pay-later companies going away for 5-8 years
You still have to pay. You won’t be paying Macy’s you’re paying klarna. Technically Klarna bought it and is loaning you money.
@@simpleplan100687 Also, when the company goes out of business, any outstanding debts will be sold off as 'assets' when the company is liquidated.
One thing that really freaks me out about this stuff is seeing how many literal children and teens have these apps, when i worked in retail I would see people under 18 using these apps all the time, the normalisation of putting yourself into debt for unnecessary items is going to have interesting effects on the consumption habits of younger generations and the economy
They gotta be using their parents money. It is rare to allow a teen to have their own single checking account.
@@jbar_85 i know they're not spending their own money but they are still "using credit" getting young people to think credit can just be used for any everyday purchase will create a generation of people who are always paying back the money they earn rather than saving, retirement ages are already being pushed back enough
Great Video. I work for a much bigger player in the space and have helped build the backend systems governing the management of these loans. These were literally the discussions we had during an acquisition. Although cost of funds have increased, we have been able to get rid of most of these fees due to vertical integration. I personally wouldn't compare this to 2008, because although we do package and sell these loans on the street, unsecured personal loans are not seen in the same light as residential mortgage-backed securities
Right, investors are aware of the risks associated with various kinds of debt.. It’s not like your clothes are going to get repossessed if speculation is bad and you can’t refinance
Brilliant documentary, I watched it all and I've learnt so many things. Thanks for making it
That sponsor ad was sneaky as hell. Completely destroyed the legitimacy you built previously in your video.
It's amazing how all of these companies that claim to be disruptive gamechangers never seem to be profitable. It reminds me of the Michael Scott Paper Company arc in The Office. The company seemed to be growing fast because of their competitive prices, even outcompeting the "traditional" companies, only for them to realize that their price point was not sustainable and that they were going out of business. Unless a marketplace is super consolidated, there's always an incentive for companies to find ways to reduce costs to lower prices for customers. If the prices seem too high despite competition, it's not because of greed, it's because they can't get the price any lower.
Now you get your new hair and new dayson hair dryer, you're now rock and roll bby
In regard to our credit system, I feel the biggest flaw has always been in the lack of education in it. I’m just under 23 years old and could not be happier with my credit score, and that’s because I started my credit history at 18 and have made only ever made manageable charges. While credit gives you more access to capital it doesn’t incentivize you to spend more than you have, it penalizes you for it. Just watching a simple video on how a credit score works will have you set for life barring any hard times or financial irresponsibility. Great video!
I got Klarna during a short stay in Germany since I had a local bank account but no credit card, it was the easiest way to make an online purchase… it was kinda depressing how annoying online payments were over there
Hoping you see but its interesting the importance you place upon brand deals and exclusivity; I live in Australia where the country's largest bank, Commonwealth Bank, has made "StepPay" which splits payments in four fortnightly payments just as many others do. But their approach is incredibly unique in that it is a MasterCard. It can be added to android pay or Apple Pay, It can be used online - anywhere -, it even has a card number, expiry and csv to be used for online purchases. It falls short of some other bnpl services by having a $1000 AUD maximum and no flexibility in terms of pay dates, but it allows literally ANYone to use ANYwhere.
I use these services to keep a higher liquidity in my account when I need to or want to make some larger purchases. I do stick within my discretionary budget for purchases so I don’t get in trouble however.