Ever go out on the town and realize you spent more than you expected. Or look at your balance at the end of the month and have to look through to figure out how you spent $1000 more than normal? (I know I have, maybe I'm the weird one, but I doubt it).
And I think in that way, BNPL does have similarities. It allows you to spend more than you planned because you don't have to think about your limitations in the moment.
And the differences are?
BNPL is a product that merchants pay for because it increases their conversion rate: customers who wouldn’t otherwise buy something, will buy it, by clicking a button and entering into a financial agreement at checkout.
BNPL has been around for decades, the innovation of digital BNPL is in making it so easy for someone to walk into a financial commitment. For example, BNPL is very effective for fashion e-commerce, a market where it’s normal for a customer to fill their basket with products and then whittle it down to stay within their budget at checkout: BNPL is an antidote to that, it tells the consumer, “you don’t need to stay in budget! Just pay for it in future!”.
We've had BNPL for long time here in Central America and South America. In this side of the world, it's also the merchants that pay higher credit card processing fees for accepting BNPL payments.
What's curious is that BNPL in Central and South America is actually provided by the plain old banks or credit card issuers themselves. They are also 0% interest (Tasa 0/Cuotas/Visacuotas) and can be split in 3 up to 24 months depending on the purchase.
They are quite handy for larger than normal purchases, like an unexpected car repair or a tire change. But they can also be used for vacations, iPhones, laptops, furniture, appliance. In some countries you can even split a fast food meal in 0% installments.
[1] https://www.consumerfinance.gov/ask-cfpb/will-a-buy-now-pay-...
The underlying credit mechanism might be a lot like a credit card but the way borrowers interact with it, which is what matters, is very different. The mechanics of a mortgage and a car loan are very similar but that doesn’t make a mortgage a car loan and vice versa.
BNPL is a bubble. BNPL is just like ride-sharing circa 2016, as soon as cheap money stops and regulation arrives, the bottom falls out and people realise that BNPL is just new paint on an old idea and should be valued as such.
BNPL will not die because it has existed for decades, and it is a valuable service to a subset of consumers but when you set aside all of the tech-boom hype… it’s just a boring financial service with healthy-but-unremarkable profit opportunities.