CNBC published an article last month on buy now, pay later loans threatening Banks. Buy now, pay later loans can be found in apps such as Klarna or Afterpay. According to eMarketer, over 85 million Americans used Buy Now, Pay Later in 2024. When someone uses Buy now, Pay Later, which allows consumers to pay in installments at no interest rate, it's a purchase that could have gone to a credit card lender or bank.
2 comments:
This is an interesting topic, as the "buy now, pay later" trend is becoming popular with Gen Zs. While consumers like this new idea of the current immediate cost being cheap, it leads to overspending and impulse buying. Although these payment systems are labeled interest-free, there are late fees for missed payments. Even though banks are not gaining that interest fee like they would with a typical loan, they will receive missed payment fees and overdraft fees as consumers will not be able to afford this new lifestyle.
I find this to be incredibly interesting, where at first this seems like a beneficial arrangement, it can easily go out of hand where people are intaking a ton of loans without the ability to pay for them. This seems similar to how the housing crisis emerged, where both consumers and banks took in a lot of risks without fully realizing the gravity of the issue. This seems to be going in tandem with how total credit card debt had reached an all time high -- nearly 1 Trillion Dollars aggregate.
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