Comment by phphphphp | Hacker News Reader

Comment by phphphphp | Hacker News Reader

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Functionally it is substantially different to a credit card. The value of BNPL to businesses is the way that it changes the basis for a customer’s purchase decision, a credit card does not have that same dynamic.

The underlying credit mechanism might be a lot like a credit card but the way borrowers interact with it, which is what matters, is very different. The mechanics of a mortgage and a car loan are very similar but that doesn’t make a mortgage a car loan and vice versa.

BNPL is a bubble. BNPL is just like ride-sharing circa 2016, as soon as cheap money stops and regulation arrives, the bottom falls out and people realise that BNPL is just new paint on an old idea and should be valued as such.

BNPL will not die because it has existed for decades, and it is a valuable service to a subset of consumers but when you set aside all of the tech-boom hype… it’s just a boring financial service with healthy-but-unremarkable profit opportunities.

I see your point in saying that credit cards and BNPL are different. But I think its very inaccurate to say that credit cards do not change customer's purchase decisions. Pre-credit cards you had to pay in cash or a check. Cash has the excellent value of you can't spend more than you brought with you. It limits spending to a pre-thought out amount.

Ever go out on the town and realize you spent more than you expected. Or look at your balance at the end of the month and have to look through to figure out how you spent $1000 more than normal? (I know I have, maybe I'm the weird one, but I doubt it).

And I think in that way, BNPL does have similarities. It allows you to spend more than you planned because you don't have to think about your limitations in the moment.

> the way borrowers interact with it, which is what matters, is very different

And the differences are?

BNPL usually breaks purchases up into discrete monthly payments up-front at checkout. Whereas your credit card lumps it together into one balance, which you can pay over time.

A credit card is a long term commitment that integrates into your personal finance life, it’s a big decision you make once and can benefit from the broader finance system — e.g: you can refinance, you have legal rights (jurisdiction dependent). A credit card is a tool for the buyer.

BNPL is a product that merchants pay for because it increases their conversion rate: customers who wouldn’t otherwise buy something, will buy it, by clicking a button and entering into a financial agreement at checkout.

BNPL has been around for decades, the innovation of digital BNPL is in making it so easy for someone to walk into a financial commitment. For example, BNPL is very effective for fashion e-commerce, a market where it’s normal for a customer to fill their basket with products and then whittle it down to stay within their budget at checkout: BNPL is an antidote to that, it tells the consumer, “you don’t need to stay in budget! Just pay for it in future!”.

> BNPL is a product that merchants pay for because it increases their conversion rate: customers who wouldn’t otherwise buy something, will buy it, by clicking a button and entering into a financial agreement at checkout.

We've had BNPL for long time here in Central America and South America. In this side of the world, it's also the merchants that pay higher credit card processing fees for accepting BNPL payments.

What's curious is that BNPL in Central and South America is actually provided by the plain old banks or credit card issuers themselves. They are also 0% interest (Tasa 0/Cuotas/Visacuotas) and can be split in 3 up to 24 months depending on the purchase.

They are quite handy for larger than normal purchases, like an unexpected car repair or a tire change. But they can also be used for vacations, iPhones, laptops, furniture, appliance. In some countries you can even split a fast food meal in 0% installments.

Another difference is that BNPL doesn't positively (or negatively) affect your credit.[1] I'm not sure how that affects any bubble though.

[1] https://www.consumerfinance.gov/ask-cfpb/will-a-buy-now-pay-...

BNPL is simply credit card with a dark pattern. Psychologically it is easier to justify 25/months for 4 months than it is to justify 100 at once (even knowing you'll pay it back later in installments)

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