wjr business beat

WJR Business Beat: Buy Now, Pay Later Practices Raise Concerns (Episode 375)

On today’s Business Beat, Jeff warns consumers about the dangers of the buy now, pay later (BNPL) payment option.

Tune in to today’s Business Beat to learn about the risks:

 

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Good morning, Paul!

During the pandemic, online shopping really came into the mainstream as a primary way. People shop and make their purchases that convenience and efficiency, especially with accelerated delivery capabilities today, make it pretty hard to beat. Adding to the convenience and efficiency is a relatively new purchase option offered now by many retailers known as buy now, pay later or BNPL.

\Now this allows consumers to make their purchases on a payment schedule rather than paying for a purchase all at once at checkout. Of course, for retailers offering BNPL has the advantage of facilitating sales that may not have happened in the absence of offering the purchase option.

And to put in perspective how consumers are taking to the BNPL option, well, consumers use the NPL to make an estimated a hundred billion dollars in retail purchases in 2021. That’s four times the level of purchases made in 2020 and could increase to $995 billion worldwide by 2026.

But how about for consumers? Well, for those who use the option as intended and have the means to make the payments, it works great. But what is unfortunately becoming more prevalent as a result of the BNPL option is that there are growing concerns over how this is contributing to mounting consumer debt. Even more concerning, some consumers are even charging buy now, pay later installment payments to their credit cards. In other words, using one form of debt to pay for another. And, of course, while the BNPL option may offer low or, most of the time, no interest on purchases, those consumers who are making their BNPL payments using credit cards may fall into a circumstance of paying as much as 20% interest.

So if you’re a consumer and think BNPL is a way to buy now and worry about it later, you should know that’s just not so. You’ll be held to the obligation of making timely payments or you’ll suffer credit hits, and perhaps even worse. And if you’re a retailer and want to offer this feature, well, you should offer it, but be aware of the ever-changing landscape that tighter regulations will have and which are likely coming soon.

I’m Jeff Sloan, founder and CEO of startupnation.com, and that’s today’s Business on the Great Voice of the Great Lakes, WJR.

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