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Comment by bcoates | Hacker News Reader

But if you read the article, it doesn’t? bnpl makes its money off charging merchants a few points higher service fees than cards, which for a lot of merchants is worth it to close the deal.

(Unstated in the article is that richer people with better credit have regular access to no-interest/negative fee consumer loans on the order of 6-18 mos., so they have no reason to use BNPL)

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I seriously doubt the long-term viability of BNPL for merchants. Sure, in the short-term it boosts sales because people who don't have money are able to purchase stuff, but eventually those marginal consumers will end up exhausting their BNPL credit as well. Meanwhile the merchant ends up paying 5% on a bunch of transactions for people who could easily afford to pay now, but don't because it's "free". The only way this model works long-term is if they get enough leverage to force merchants to offer BNPL at the same price as cash, the same anti-competitive model used by credit cards.

Only if we assume that the existence of BNPL won't change consumer habits.

I think food is easy to buy impulsively ("I'm hangover and hungry - let's order some pizza delivery"), and removing barriers like "I don't have money right now" may cause - hypothetically - some people to spend more on food delivery and (by necessity) less on other things. I'm not sure how sound this model is, but I think it can't be ruled out.

Needles to say, I'm not sure if such change would be a good thing.

I agree about the viability, but it's the BNPL providers that are left holding the bag here, not the merchants. If it appears to boost sales sufficiently that the 5% fee is worth it, then businesses will continue to offer BNPL as long as the BNPL checks don't bounce.

I suspect that at some point, the fact that BNPL usage tracks with bad credit will catch up to the BNPL providers and we will see some sort of shift to the status quo, either in terms of ease of getting a BNPL loan or the way BNPL treats their clients.

> bnpl makes its money off charging merchants a few points higher service fees than cards

Restaurant food is a low to very low profit margin business that takes years to break even – with a good strategy and management.

Charging the merchant, i.e. the burrito service provider, means that they will inevitably have to pass costs onto the burrito consumer at the consumer's disadvantage.

But why would the merchants willing to pay the fees in providing a BNPL scheme for their customers?

One would assume that it would increase sales, which makes it worthwhile. It's not caused by increase outreach though: from what I've seen, BNPL is usually an additional payment option when you're already on the product page.

Then the question becomes: who are the extra customers that a BNPL scheme would bring, that wouldn't have made the purchase if such a scheme was not available?

Oh it absolutely does come with increased outreach. The BNPL providers have apps marketing deals to users

The extra customers are people who can’t afford to buy whatever nonessential product is being hawked, unless it is on a payment plan.

BNPL just encourages overspending by the most precarious consumers, ensuring that they will never get ahead.

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