The Real Cost of BNPL
There’s a fancy new credit card in town and this one really makes you pay.
Buy Now, Pay Later. In theory, the concept is fairly simple and is frequently referred to as a “credit line” in business. Smaller business with limited access to formal lending processes and a distrust for the system will tend to trust their suppliers to provide such credit lines. Goods or services are supplied and the payment is deferred to the next billing cycle. Easy, simple, and it works reasonably well.
An unfortunate juxtaposition(wannabe founder meets existing technology)steamrolled the concept into the mainstream economy.
As we face up to the consequences of maturing capitalism and the extremes of purely profit driven economics, we’re discovering an ugly side to our economies. In 2008, banks and credit institutions spiralled the world economy into a recession by lending to those they shouldn’t have. Fast forward to 2022 and we witnessed — perhaps unsurprisingly — the collapse of Terra, a so-called stablecoin exposed large scale flaws in cryptocurrencies and their deregulated(lol) structures and a wipeout of over 2/3rds of the entire cryptocurrency market. Don’t even get me started on NFTs.
In the clamour, it is easy to ignore the newest and arguably the most sinister new entrant to the repertoire of profit-hungry bloodthirsty capital funds and banks. Buy Now, Pay Later. Otherwise known as indentured servitude to startups that burn cash like nobodies business, this monstrosity’s very premise is to make their consumers spend the money they don’t have to buy things they don’t need and destroy their credit rating.
Capitalism is many things and has been many things. It has repeatedly taught us to take the pain with the gain. But increasingly, the problem is that the us who take the pain are poorest sections of society. No wonder demagogues are in the ascendancy huh?
Back to BNPL. It exploded on to the scene as the lockdowns eased and consumer spending began to balloon. The usual marketing spins portrayed it as the gateway to purchases that were out of one’s grasp mere months ago. Splitting up payments to fund extravagance seemed to be the next best problem to solve in a world plagued by hunger, poverty, climate change and inequality. Hurray?
This isn’t new. Exploitation is the very basis of credit cards but they are limited in their scope by heavy regulation and credit scores. BNPL faces no such hurdles and can extend its tentacles to the most vulnerable sections of society. Those that spend most of their paychecks on daily necessities are particularly at risk. Not only is it extremely difficult for them to service their debt, but also extremely easy to overspend, even with simple, smaller expenses such as slightly more expensive essentials like food.
Theoretically, capitalism should direct the money to the most productive use. Practically, it is nearly impossible to define what would be most productive. Is it really productive to saddle a nation with debt? Is this blatant consumerism the only way forward?
Do the economics of yesterday work in this late stage of capitalism? Perhaps not. As we face up to the biggest challenges seen in generations, perhaps poster children of blatant profiteering like BNPL will open up people to the stark realities of economics today. But then again, when has that ever made a difference?
