The dark side of Buy Now Pay Later apps

Think twice before using Buy Now Pay Later apps. (Timestamps below) There are no free lunches. Find out how expensive it is to offer (for a merchant), how that can increase prices, and how using other methods to pay might be better for you (and also for lower income households!)

***Correction: As pointed out by the (great) blog "Michael James on Money", I should have factored in that the BNPL company collects a riskless $25 payment upfront. So really, they lent out $69 over 6 weeks. That increases the effective APR on their loan from 55% to 76%. For a more detailed look, visit: https://www.michaeljamesonmoney.com/2021/03/buy-now-pay-later-apps.html

00:00 What are "Buy Now, Pay Later" companies?
00:46 Example of a Buy Now Pay Later transaction
01:12 How do these services make money?
03:10 How much does it cost the retailer?
05:05 How lower income households subsidize richer households
08:30 Is using a regular credit card transaction better?
10:09 What's the ideal way to pay for discretionary expenses?
11:09 Delinquency rates for credit and Buy Now Pay Later
11:35 How much revenue do missed payments generate?

Resources and links mentioned in the video:
How lower income households subsidize the rewards programs of wealthier households: https://www.nytimes.com/wirecutter/money/who-pays-for-rewards/
Factoring Accounts Receivable: https://corporatefinanceinstitute.com/resources/knowledge/accounting/accounts-receivable-factoring/
Credit Card Competition Tribunal in Canada:
1: https://www.cbc.ca/news/business/competition-bureau-won-t-appeal-ruling-on-credit-card-fees-1.1873730
2: https://kitchener.ctvnews.ca/competition-bureau-case-against-visa-mastercard-fees-dismissed-1.1379630
How to calculate APR on short term loans: https://consumerfed.org/pdfs/AAAPL-How-to-Calculate-Interest-Rate.pdf
How to calculate the interest payable on a credit card: https://corporatefinanceinstitute.com/resources/knowledge/credit/average-daily-balance-method/

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Видео The dark side of Buy Now Pay Later apps канала Preet Banerjee