The Buy now, Pay later trap

👋 Hi all,

Today is number 20 already, and it’s packed with surprises. My two bookmarks are about a neat little experiment that’s currently running at DoorDash in the US and another experiment how AI photos will trump your online dating profile.

My essay is about a rising phenomenon that I can’t wrap my head around, but startup founders always do it: Buy Now, Pay Later. Well, it's a good thing this one is free, and you can get it now; enjoy!

See you on Tuesday,

Bas

Earlier this week, I read this article in The Financial Times about the significant rise in the use of ‘Buy Now, Pay Later’ (BNPL) options when shopping online. Overall, there’s a lack of regulation around these services and providers like Klarna. I will quote a small part of the article to get you on the same page:

“Frequent users of “buy now, pay later” products are more likely to be in financial difficulty, the UK financial watchdog has found, as the number of people using the short-term method of credit jumped sharply. Consumers who have used BNPL products more than 10 times in the past year were four times more likely to have missed paying a bill in three of the past six months, research from the Financial Conduct Authority has found.“

What a surprise. If I were younger, I would probably also use this to make sure I could buy those fancy clothes or spend above my limits with the upcoming Black Friday. Most people know the risks when spending money that isn’t yours or lending against (rising) interest rates will eventually cost you more than the amount you purchased the goods for.

While the above news was about consumers, I see the same evolving pattern among startup founders. You probably know where this essay is going, so let’s dive right in.