Buy Now Pay Later Hot Take With Luke Hinderaker

Hey, GonzoBankers. Tony DeSanctis back with another hot take. The hot topic today, buy now, pay later.

Lots of news out there about buy now, pay later. We’re going to talk a little bit about it.

I wanted to touch on something that was specifically used across social media to talk about the risks and challenges of buy now, pay later, which was the stat that came out that somewhere between 50% and 60% of Coachella tickets this year were bought with buy now, pay later.

Rather than me try to explain that, I actually found someone in our office who used buy now, pay later for Coachella. So I’m going to introduce everybody here to Luke, and we’re going to find out how financially irresponsible and bad with money he is to be using buy now, pay later for such things.

So, Luke, thanks for joining us.

Awesome. Thank you for having me.

So why are you so irresponsible with buy now, pay later? Why did you use buy now, pay later to purchase your tickets for Coachella? Tell me what your thought process was.

I had not considered using buy now, pay later, but after using it, I sort of realized that it is a viable option. In a lot of ways, it provides flexibility and allows me to pay in a way that is not a lump sum.

My first realization that it is viable is that it is a flat fee.

So you basically each paid $10.25?

Exactly.

And that was worth it to you?

One hundred percent worth it.

Got it. And it just allowed you to spread the payment out over time.

Right. So I essentially was paying $10 for that freedom and flexibility that the buy now, pay later provides.

You’re not financially stressed. You’re not buying your groceries on buy now, pay later. It was just a more convenient way to do it, and it spread the payments out for you over time.

There’s interest that you pay upfront, but it’s basically, the way I think about it, a non-interest loan after you pay the initial payment.

Okay.

And it’s unlike a credit card where you kind of have to manage your own spending habits. It’s set up front where it’s like, you’re paying $110 a month, that’s it. You can sort of just have the automatic payments rolling, and you stop thinking about it.

So fixed term, fixed payment, fixed ending, right? So this thing is over once I get it paid off.

Mm-hmm.

And that’s way more convenient than a credit card.

Way more.

Yeah. When we think about buy now, pay later and all the discussions around why it works and why it doesn’t, it’s important to understand that it is actually a different product and has different benefits than traditional credit cards.

While there are a lot of discussions around losses growing and things like that, Klarna was called out specifically for their losses growing by more than double. But, for example, if you look at their losses, their losses went from 51 basis points to 54 basis points, but their volume grew so much that their losses looked way worse.

So when you think about buy now, pay later and you think about the implications, don’t assume that it’s all doom and gloom and that it’s all people being irresponsible.

Folks know what they’re getting themselves into. It’s an alternative product and, in some cases, a better solution than credit cards for consumers, which is something we as bankers need to be aware of.

Banks and credit unions aren’t competing in the buy now, pay later space because they think it’s not a viable product. I think Luke just explained to us why it’s a viable product, both for us because the fees that are paid are income back to us, but also from a convenience perspective for him and why it’s better than a credit card.

Let me know in the comments if you’re doing buy now, pay later and if you’ve had any success stories with it.