The next frontier for buy now, pay later is plastic

In the face of rising inflation, rising interest rates and slowing economic growth, there’s more competition than ever for consumers’ money — and even how their purchases are made.

During the pandemic, most shoppers have shown a preference to buy now, pay later when it comes to payment and still do: installment buying has exploded in popularity with a general increase in online shopping.

Now Apple is joining the mix with Apple Pay Later, which lets consumers pay in four payments over six weeks, increasing the pressure on similar offers from companies like Affirm and PayPal, according to Insider Intelligence principal analyst David Morris.

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“This will put additional pressure on BNPL’s fintechs, which are already facing regulatory, competitive and investor tailwinds,” he said.

Not necessarily, according to Sezzle CEO Charlie Youakim. The good news is that “the industry continues to grow,” he said.

Already, 4 in 5 U.S. consumers use BNPL for everything from clothes to cleaning products, according to Experian, and most shoppers said buy now, pay later could replace their traditional form of payment, primarily credit cards. .

Consumers are seeing a buy now, pay later option when shopping online at retailers like Target, Walmart and Amazon, and many vendors have also introduced browser extensions, which you can download and apply to any online purchase . Then there are apps, which let you use installment payments when you buy things in person.

But as Americans tighten their belts, big BNPL players including Sezzle, Zip, Affirm and Klarna are trying a new tactic to entice consumers – and it sounds a lot like an old credit card.

All announced the release of a physical card, which will be linked to your bank account with the ability to pay in interest-free installments over time.

While Apple aims to replace everything in your physical wallet, rivals say there’s still a place for plastic, and these new offerings are innovative too.

“We believe Affirm Debit+ is not just the most significant debit card upgrade since its debut over half a century ago, but a truly game-changing idea that can help millions of people. to enjoy life with much less anxiety about spending and saving money,” said Affirm CEO Max Levchin.

Meanwhile, some experts are warning that consumers with multiple BNPL loans with multiple payment dates could find themselves spiraling into debt.

“The sector is still in dire need of regulation,” said Amrit Dhami, associate analyst at analytics firm GlobalData. “More transparency is needed to ensure consumers understand that they are accumulating debt through BNPL, which may negatively affect their credit ratings.”

The Consumer Financial Protection Bureau has opened an investigation into how BNPL lenders use consumer data and report that information.

The financial watchdog said it was particularly concerned about the impact of these programs on consumer debt accumulation, as well as applicable consumer protection laws.

“The problem is that when they use buy now, pay later for more and more expenses, including groceries and other in-store purchases, they can rack up a lot of debt,” the director of the CFPB, Rohit Chopra, in an interview with CNBC. .

The CFPB has yet to announce its next steps.

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