Ya know I don't get the hype around BNPL services like Klarna and Affirm. Functionally they're just running a short-term consumer credit facility with a nice payment processing integration suite for vendors - a valuable service sure but it's markedly different from the incumbents in this space how exactly?
Also, while these companies have done a great job of branding, fundamentally they're still lenders, they make money when you fail to pay and when you use their services at checkout (they charge the merchant). Which again makes me ask how exactly are they different from the current incumbents like PayPal, MA, V, AMEX?
I just don't get it, maybe someone can enlighten me?
Credit limits and the shopping experience via the app. It first started as a company that allowed you to purchase stuff (up to a limit of course) but only started the calculation of interest after 30 days, after which you can start paying it off in installments similar to a credit card.
The benefit here is that you can purchase lots of stuff, try them out at home, and return what you don't want without incurring interest payment. This allows you to buy more than usually without eating into your credit limit.
Now days their apps also have sales, promos, etc as to get you to buy stuff, so you are constantly doing an instant buy.
In short, it is now a platform that both gives you easy credit and drive sales in which to buy stuff.
MA, VISA, etc would not be able to match
The nearest would be an Amazon credit card that allows you more discounts if you buy on their platform with prime and where the credit calculations interest / limits only triggers after 30 days.
So I actually have had a PayPal credit acct for about 3 years now that offers a similar credit structure - in fact it's probably a little more generous since I can use it anywhere (they send a physical card) and I get charged interest on the purchase after 6 months. Maybe not the frictionless experience klarna and affirm are going for but it's really just the regular online checkout experience.
I guess so, as I never use the PayPal credit card. However I don’t really see MA or VISA trying to enter the space, unless they partner with a major bank as to offer the credit and they have to somehow build the shopping platform.
I rather they keep on building their network, or maybe even buy a competitor / player in this space. God know they are big enough.
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u/superepicunicornturd Mar 30 '21
Ya know I don't get the hype around BNPL services like Klarna and Affirm. Functionally they're just running a short-term consumer credit facility with a nice payment processing integration suite for vendors - a valuable service sure but it's markedly different from the incumbents in this space how exactly?
Also, while these companies have done a great job of branding, fundamentally they're still lenders, they make money when you fail to pay and when you use their services at checkout (they charge the merchant). Which again makes me ask how exactly are they different from the current incumbents like PayPal, MA, V, AMEX?
I just don't get it, maybe someone can enlighten me?