alt Hacker NewsI always thought it was interesting that the BNPL loans’ interest is subsidized by the retailer, which pay the premium in order to improve the chance of a sale (hoping to hone in on those who can’t afford it now and make it back on that extra spend). Which means high credit score, wealthy spenders could put everything they can on BNPL plans and profit the (minuscule) interest over time, but if you can do that on big purchases, maybe it’ll add up. Same way credit cards work, if you have the cash flow and always pay them off in full, you can make a few bucks in a HYSA for the 40 ish days before the statement.
I can see a future where a BNPL loan is not offered if the signals the checkout page collects indicates wealth, since they don’t have an issue of cash flow stopping a purchase. Imagine a loan that has a credit score maximum, not a minimum.
Replies
Discriminating wealthy customers increases the risk profile of the loans which is already questionably high. Retailers are used to paying extra for credit card transactions anyways. BNPL really is just meant to compete with credit cards by splitting the runway across more months for the loan. Equally predatory business model but credit cards are able to offer the same interest amortization that you can do with bnpl through the rewards programs. They're effectively the same.
This is a theory, but it flies directly in the face of reality which is that nearly every retailer on the planet would prefer more wealthy customers.
I’m not sure. I’m sophisticated enough to use BNPL and set aside the funds in a HYSA, but I never have as you miss out on: credit card rewards, credit card purchase protection, credit card extended warranties, credit card chargeback infrastructure. Additionally, I’ve seen BNPL offers where the first payment is in 2 weeks compared to 30-50 days for credit cards depending on when your statement closes and how soon you have to pay, so the extra interest is less than you might think. It could make sense for very large purchases, but then, that’s also where credit card features can really come in handy.