'Buy now, pay later' is sending the TikTok generation spiraling into debt
sfgate.comIt seems like the "TikTok" generation is lacking financial literacy. I was too at that age. In the US, we don't typically have a class covering money in the US, which is unfortunate and expensive early in life.
That hasn't changed, but what perhaps has is that 1) social media and fast fashion have created even more demand for the latest clothes, and 2) every clothing retailer prominently displays "buy now pay later" options, something that only existed through credit cards when I was a kid.
Anybody without financial literacy can deduce why "Buy Now Pay Later" may be bad for them. Theres a deeper issue.
Article's a bit of a mish-mash. Mostly points finger at Afterpay and the dark patterns it used both in the marketing campaigns and in app.
Unfortunately it also misses one major point aside from the lending regulation and reporting of debt/late repay to credit scoring agencies, which is how the hell didn't these people underwrite their users properly? In the end it's the company's money that is put upfront.
They don’t bother with underwriting for these small (to them) amounts. Like a bookie they know the odds and they play the averages.
Only way the loans aren't being paid are in cases of bankruptcy? They don't need to because they can always collect?
Nothing worst then being a debt slave for worthless shit. They will learn.
There is a new sucker born every minute...
The vehicles of exploitation might change, but they will be always around. And I don't think as society we are ready or even capable to stop the debt based instruments. I don't think most people would be happy if we banned all but few categories of lending. Let's say vehicles and housing. And maybe even refinancing on housing.
Hasn't the economy for the last twenty years been mostly funded by consumer debt?
With rising housing prices and stagnant wages, this how trickle up happened
Maybe one should stop the blame game i.e. "The g-government d-did it!!!" and wonder why debt is increasing in general. The answer is that saved money is taken out of circulation. To keep the economy alive, a certain amount of money must flow through it.
Let's say $20 trillion must flow through the economy per year. People save $1 trillion. Only $19 trillion flow through the economy next year. Usually companies would simply borrow a new $1 trillion through loans into existence. However, with population growth slowing down, companies don't need to grow and invest more so they stopped borrowing. Consumers stepped in until they too thought that they have no need for further debt. To get back to $20 trillion, the government must now borrow money on behalf of all the people who aren't credit worthy enough to borrow money. The more people save, the more the government needs to replenish the circulating money supply just to stay at $20 trillion.
Of course in practice the government doesn't try to maintain a stable GDP, it wants a stable GDP plus some. The reason for that is that increases in productivity necessitate economic growth to maintain full employment. Yes, it's quite stupid. If you have an economy that isn't growing, then increasing productivity will concentrate income within the most skilled individuals even if they have no need for further income, which reduces overall economic efficiency as money is being allocated away from basic needs like housing or food and into the financial market.
Ever wondered why poverty appears to be a "human constant"? Because we think we should give all the money to the most skilled individuals without any regard to whether they actually need that money. When you think about it, jobs shouldn't be allocated to the most skilled, they should be allocated to those who need the money most as their spending will drive further economic activity that then lets the skilled work on useful things. Someone with a broken down car knows better how to spend their money than an investor speculating that you are going to spend your money on a $800 juicer. However, we know that the guy with the broken down car is in distress and we love abusing that situation to our benefit despite the fact that the economic inefficiency is obvious to the naked eye.
Microsoft Edge seems to be introducing the same feature. I really though their browser won't become trashy this time. How naive of me.
> ... high-level staffers at Affirm and Afterpay ... emphasized the accessibility of these services, especially for younger consumers looking to bolster their credit and consumers working to restore their credit scores
Something about that feels pretty dystopian.
Agree, I think there's also an overblown perception that you need to obtain credit and loans in order to build a decent credit rating. Which whilst true, doesn't really disadvantage you if you don't.
Why?
Seems like a financial version of Nestlé expecting adulation about how they provide accessible milk to third world countries.
Nothing new... Debt based consumerism has been around for long time. This is just new more streamlined and simpler version. How long has selling stuff for instalments been around?
Assuming you have the money why is using these services a bad financial decision? Isn’t a good idea to postpone payments in an inflationary economy when there’s no interest?
It's like Vegas. Some people might leave the city with more in their wallet then when they flew in, but in aggregate there'll be a lot of losers.
If that wasn't true, the lending companies would know there's only little to no profit to be made, and they'd stay out of it.
It's things like this that make me believe that open democracies like the US are doomed to be outcompeted by countries run like China/Russia/Singapore (some work better than others). Buy Now Pay Later for consumer goods is obviously bad. An effective government should be able to just say "it's gone" because it's bad. But in the US there would have to be a law passed, which would be essentially impossible, and even if it was, it would be extremely hard to define the boundaries.
I'll quote my comment elsewhere:
"BNPL providers are held to far higher standards than Credit Card, Personal Loan, or Payday Loan companies. I'm not sure I understand the HN addiction to attacking them.
Unlike all the examples above, Afterpay doesn't charge interest, has capped late payment fees, and has a very low debt ceiling. It's the perfect way for younger people to learn how to manage debt."
I should have mentioned that their late payment fees are (very) low.
If you want to get rid of BNPL, you'd have to get rid of literally all forms of debt - BNPL is far and away the most consumer-friendly form of debt that I know of.
Yes, a high functioning government would essentially wipe out 2/3 or more of consumer lending. As an example, Singapore literally forces some of your income into a savings fund that's just for housing, retirement, and healthcare. It's not something optional -- the nanny state literally taxes you into being a fucking adult. And it works.
The Australian government does the same thing; and also permits BNPL.
BNPL has been thoroughly, thoroughly investigated by the Australian government because people have the same conclusion as the HNers here - 'they must be doing something wrong'
But if anyone does what I do, which is to look more deeply into the topic, they'll discover that this is actually the least predatory form of consumer debt (if not the least, close to it), and for this reason governments are content to continue with it.
> Buy Now Pay Later for consumer goods is obviously bad.
On the contrary it frees up significant economic resources, and so is obviously good. But access to capital, like the good itself, isn't free. In both cases: Don't buy what you can not afford.
Really?
I thought these ‘financial instruments’ were used only by the very wealthy… ;)
People have been falling for these scams forever. Naturally a generation which lives online will be more vulnerable to attacks coming through platforms they pay more attention to. Is there anything fundamentally new, though?
I think the challenge with these online services now is that their barrier to entry is minimal.
You can sign up to these services at the click of a button and they're also heavily promoted next to payment providers such as Visa. As opposed to them being a separate service you would sign up for, they're integrated into the checkout process as easily as PayPal.
I even saw a service similar to this here in Australia called "My pay now", where they say you can access a portion of your pay early. When in reality you're just borrowing an amount that is a portion of your upcoming pay, with the expectation that you will pay it back when you get paid. The way it was marketed I thought it was a government scheme where you would actually access a portion of your pay early, but no.
>The way it was marketed I thought it was a government scheme where you would actually access a portion of your pay early, but no.
I don't want to be insulting or make this a flamewar, but really? c'mon. It's not like they're putting the coat of arms in their logo, there is _zero_ indication this is a government run scheme.
If a presumably fairly well educated and tech literate person thinks "MyPayNow" button next to their latest order of trendy clothing/smartphone accessories/whatever is a government scheme, I'm not sure how much anyone can do to prevent less well educated and tech literate people being taken advantage of...
My thoughts when I first heard the radio commercials was that it was a government scheme, having said that their website and their other visual marketing doesn't give me that indication at all. However I was never interested in using it to do any research.
My point being that the wording "My pay now" and the description of it allowing you access upto a quarter of your pay early, is fairly misleading. You aren't accessing your pay, you're obtaining a loan, of which the amount is a percentage of your salary/wage, which you will pay back with your pay.
Forget the idea of it being a government scheme, that was irrelevant to my argument.
> I even saw a service similar to this here in Australia called "My pay now"
https://en.wikipedia.org/wiki/Payday_loan
This sort of behaviour is why “money lenders” became a pejorative term.
"Buy now, pay later" isn't a scam.
> "Buy now, pay later" isn't a scam.
Prime example of the 'I'm not a rent-seeker, I'm a disruptor' if anyone wants to know what it looks like.
It is a scam if you know you've been bombarding them with algo-targeted ads and have been subjecting them to the endless amount of influencer-porn these kids seemingly cannot do without anymore due to a horrible data driven diet that people who work for FAANG work on almost exclusively.
It's a scam, just admit it, we all know what it is: you're targeting people who cannot and will not be able to afford much, and make them think this is what is missing in their life so you can lock them in debt and keep the consumerist cycle going.
You're the 21st century perversion of a Marketing con-man, but unlike the 20th century version with all the glamour, sex and booze you guys play fortnite, watch furry porn and get doordash sent to you while you suck on a vape in your empty apartment.
The real question is: why do so many think you guys are anything remotely close to being successful? And why does tech seem to set such low standards for what can be construed as success?
Next we're going to hear about how Robinhood was the great emancipator of the Millennial and Gen Z, and not really just a front-running racket for hedgefunds, too.
Still not a scam, although I agree that it's not ethical to push this on impressionable kids who would probably choose to go in debt for some new clothes.
Whilst it may not strictly be fraud, another common usage of the word 'scam', is 'to deprive of by deceit'. If it's unethical, then it's likely misleading - a form of deceit. You don't necessarily need to meet some legal line for it to be a scam or not. It just needs to be misleading, and capable of causing harm.
If you sign a contract and then can't abide by the terms of the contract, you haven't been scammed.
This is specifically not the case - loan sharks are frequently punished for creating contracts that are not reasonable, and cannot be upheld by law as it violates consumer protections. One of which is that contracts are required to be reasonably understood by all participating parties.
BNPL providers are held to far higher standards than Credit Card, Personal Loan, or Payday Loan companies. I'm not sure I understand the HN addiction to attacking them.
Unlike all the examples above, Afterpay doesn't charge interest, has capped late payment fees, and has a very low debt ceiling. It's the perfect way for younger people to learn how to manage debt.
If a young person is learning to manage debt with them, that necessarily implies that they don't yet comprehend what taking debt means and cannot reasonably be expected to fully understand the consequences - which may make the contract invalid.
This definitely isn't enough to make the contract invalid, however you could prove every BNBL business wrong and put them out of business if you find a court that agrees with you.
But it's not misleading or deceitful.
If it's not misleading, then it wouldn't be impacting "impressionable kids". They're misled to believe that there won't be a negative consequence.
The marketing exists outside of the "buy now, pay later" scheme. "Buy now, pay later" is not a scam.
The very phrasing, "buy now, pay later" is predicated upon the implication that it provides a benefit without a negative.
Where does it imply a benefit without a negative? The "pay later" part is clearly stated
"Pay later" is a benefit, to the audience we're discussing, as it means "not now".
Young adults actually have processing problems over impulse control [0], and so cannot see any drawback to "not now" - in fact they likely do not have a way to fully conceptualise that something will occur in the future.
All "buy now, pay later" translates to is "instant gratification", nothing further.
Lacking impulse control does not mean that the entire concept of "pay later" is a scam.