The Rise of Buy Now, Pay Later

Tropical Storm Erin is forecasted to strengthen into a hurricane this weekend. Since my mom’s name is Erin, I started wondering, how exactly does the hurricane naming process work? I know the list is set in advance in alphabetical order, but do they screen the names for certain people? Like in Veep, do they skip the President’s name? What about sitting Senators or Congress members? And does the person who makes the list ever take their own name off?

Buy Now, Pay Later (BNPL) is everywhere. From your Amazon cart to Chipotle, instant gratification and long-term debt are apparently the new hotness. Someone clearly watched Yes Man and stole Jim Carrey’s idea for microloans.

Who’s who in BNPL

• Klarna - $105 billion in gross merchandise volume

• Affirm - $33 billion in gross merchandise volume

• Afterpay - ~$32 billion in gross merchandise volume

These companies have exploded since 2020. More and more people are financing necessities, not just a new dirt bike or 12 Yankee Candles. But while combing through Afterpay’s investor report, one stat jumped out at me:

98% of all purchases with afterpay incur no late fees and 96% are paid on time! Looks like Jim Carrey was on to something. 

If Everyone’s Paying on Time, How Do BNPL Companies Make Money?

Sure, they still rake in fees and interest from late payers, but that’s not the main revenue source.

The real money is in merchant fees: 4–9.5% for the privilege of offering BNPL at checkout. That’s way higher than credit card transaction fees… and you just know the execs at American Express are furious someone out-charged them.

Why do merchants agree to it? It opens the door to more buyers. A $2,000 mountain bike might blow past your credit card limit, but ten payments of $200 feel “manageable.”

Oh, and they’re absolutely selling your data. It’s a beautiful little cycle:

• You buy that $1,200 ice bath you’ve been eyeing for three months.

• BNPL makes a cut on the sale.

• They sell your data showing you’re also browsing an expensive TaylorMade driver.

• A marketing firm buys the data, targets you with BNPL-friendly golf ads.

• You cave, buy the driver, and the cycle repeats… maybe next time with an ergonomic keyboard.

If you feel personally attacked right now, it probably means we have similar shopping habits.

So… Is BNPL Bad?

I’m not here to “yuck anyone’s yum”… but yes, BNPL is bad.

In theory, you could buy everything on 0% interest, stash the cash in a money market fund, and make a small profit before the payments come due. A dollar today is worth more than a dollar tomorrow. Why pay $100 now if you can earn 0.33% interest on it for a month?

But you’re not doing that. You’re just delaying the pain of a big (or small) purchase. If it’s a necessity, fine. But if it’s a splurge, how will you feel in six months still making payments on an ice bath now growing dust and mold?

Buy things you want when you actually have the money.

Invest your dollars today so you can buy your toys tomorrow.

That might just be our new sign-off.

The Real Red Flag

The scary part isn’t people buying toys on BNPL; it’s people using it for groceries. That’s a ticking time bomb. Defaults are already creeping up in BNPL loans, and if your weekly food bill is financed, you’re not just delaying pain… you’re compounding it.

Debrief on Deck

TARIFFS. Do you know what tariffs are in place? I sure don’t. I am going to try and find out by next week and tell you about them. Thank you for your attention to this matter!

As always, please reach out to us with any questions or comments you have. You can reply directly to this email or find us on Instagram.

Until then, stay the course.

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