Burrito Now, Pay Later
247 comments
·May 11, 2025spicyusername
ChadNauseam
Food is a basic human need, paying someone to make a burrito for you and then hand deliver it to your house is not. There is no shortage of food in america. In brazil, many people don’t eat meat because it’s too expensive, and get the vast majority of their calories from beans and rice. you can also do this in america, but almost no one does outside of college students because food is cheap enough relative to wages that people can generally afford to eat a wide variety of foods.
The bigger problem with BNPL, in my view, is that a lot of people are not able to understand the concept of credit. I knew people in my hometown who got a credit card, and their reaction to having a $3k credit limit was the exact same as if they had gotten $3k deposited into their bank account. I’m honestly not sure whether they understood that they didn’t just randomly get given $3k. I saw this happen multiple times. But it sounds very patronizing to say the “there’s a lot of poor people who don’t understand credit, so we need to prevent them from having access to any so they don’t get the chance to screw themselves”, so I understand why no one does.
lumost
Curiously, medieval societies struggled with “usury”. Effectively being a wage earner was a tough game as you might owe rent, have a bad month, or end up overly indebted. Most wage earners eventually became indentured servants or worse. This contrasts with peasants who had permanent land rights and owned everything they produced, and did not have a fixed rent.
It’s not just that people don’t understand debt, it’s that the vast majority of people live in precarious situations which make debt a temptation. A little debt to grease transactions and buy assets is good, a lot of debt is a burning crises.
catlikesshrimp
>"This contrasts with peasants who had permanent land rights and owned everything they produced, and did not have a fixed rent"
There are places where they didn't own anything. Decades ago I read that at some point each feudal lord coined his own currency for his peasants. If a peasant escaped, he wouldn't have means to take anything with him.
Same in Russia. A couple centuries ago, serfs came with the land. They could be liberated if the owner decided it. However, being a free man is quite difficult without a job.
InsideOutSanta
> But it sounds very patronizing to say the “there’s a lot of poor people who don’t understand credit, so we need to prevent them from having access to any so they don’t get the chance to screw themselves”, so I understand why no one does.
OTOH, the article literally says that "data [shows] that those with lower incomes, lower education, and worse credit (redundancies here) are more likely to use BNPL."
Most consumer protection laws are somewhat patronizing, but since you can't be an expert in everything, we need them.
zipy124
How is that on the other hand? I'm a little confused, as if anything it supports exactly what the person you are replying to was saying as they only mention that they are more likely to use BNPL, it doesn't take the extra step of saying perhaps they shouldn't be allowed to, or should be protected when doing so.
wronglebowski
I agree entirely with this sentiment. It almost feels like it's our ages "Keeping up with the Joneses". Even if 30-50% of your social circle can afford it without incurring debt if it becomes the social norm we'll all keep doing it. It's unfortunate but I don't know how this generation learns this lesson.
phyzix5761
Because its driven by something that transcends generations: human desire. Its a very powerful emotion that drives us to act (as is aversion). But, we can train ourselves not to react to this emotion and over time it does become weaker and, eventually, completely subsides. It does take time and practice though which most people are not willing to put in because they don't see desire as a problem.
bluedino
> In brazil, many people don’t eat meat because it’s too expensive
During the 2008 recession, I remember a woman who called in to one of the financial advice radio shows (Dave Ramsey?). She was talking about how her husband has been laid off and they were eating beans, tortillas and rice, and how i simply thought, "so you're eating....mexican food?"
That said, it's crazy how a burrito is $12 now and a two taco, beans/rice dinner at the generic Mexican restaurants in town is $16. This is peasant food that should be dirt cheap. Even the gray-market facebook food sellers want $12.
mattmanser
That's also labor and capital costs though, not just raw ingredient costs.
It's also a byproduct of minimum wage, the time spent on making the burrito, prepping the kitchen, cleaning up, processing the order, doing the accounts, etc. all adds up meaning a single meal has a minimum cost directly proportional to minimum wage.
Though don't get me wrong, minimum wage is an overall good imo.
However if we had universal basic income instead, and thus could scrap minimum wage, you might see the price of a burrito drop.
poincaredisk
Why only poor though? There's plenty of middle class people living above their means by abusing credit too. They can deal with the consequences better, but it's equally financially harmful for them
ChadNauseam
Certainly, but there's less motivation to protect the middle class from poor financial decisions because it can be assumed that they have some financial leeway already and aren't going to be put on the street by one too many doordash orders. So they don't really factor into the discussion much
thanksgiving
There is really no such thing as a middle class though. We are all n missed paychecks away from being unhoused.
nkrisc
There are many, many stupid people who would benefit from being protected from themselves. How far down that path we want to walk as a society is an eternal debate.
cryptonector
There is "protecting them from themselves" and then there is "protecting them from loan sharks who predate on their stupidity".
tirant
The main issue is forcing that protection down the throat of whomever doesn’t want to be protected. Or in other words, believing that the government knows better than you on how you should live your life.
petesergeant
But sadly also a lot of not-stupid people who sometimes need to (or would benefit to) borrow on short notice, and it's better that they're doing that on a credit card with protections and that they can pay off. I've been both: easy credit in my youth ended up with me racking up a lot of silly debt that I had to spend several years living frugally to pay off, but also now that I'm much more financially secure, having some credit cards that work as a very cheap line of credit if I'm having a liquidity crunch is also very useful.
walrus01
> Food is a basic human need, paying someone to make a burrito for you and then hand deliver it to your house is not. There is no shortage of food in america.
Do some googling about what is a "food desert", plenty of lower income people in the USA live somewhere that the grocery store options and fresh, nutritious ingredient shopping options are VERY poor. Or a costly distance away to drive on a regular basis.
I am not saying this excuses ordering $25 burritos on doordash or uber eats but it is an influencing factor.
ChadNauseam
The lack of food can be explained either by a shortage of demand or a shortage of supply. Many people assume that the demand is there and the supply is the problem - people are desperate for healthy food but no one wants to sell it to them for some reason (the reason is always left unsaid). Instead, they have no choice but to shop at 7/11. So presumably, as soon as a store selling fresh, nutritious ingredients opens up, it would be swarmed with people buying broccoli and chicken breasts. However there is some evidence that the reason no healthy food is being sold is because people's demand for heathy food is being provided by a supermarket a few miles away, or that they just have little demand for healthy food in the first place. Here is an article with more information: https://www.nyu.edu/about/news-publications/news/2019/decemb...
bluedino
If you live in a "food desert" you can get a frozen burrito at Walgreens or a corner store for $1
magicalhippo
There was a short discussion here[1] recently on this topic, where I added[2] some extra context. Turns out it's probably not so cut and dry.
shermantanktop
“Fear of sounding patronizing” sounds like a cocktail party problem. If that’s stopping someone - being made fun of by another member of their elite class - that’s a recipe for failure.
akoboldfrying
Being careful not to sound patronising towards the poor in public is one of the most ironclad unstated rules of wealthy social groups in the West. Breaking it immediately reveals one to be a member of the outgroup ("gauche"/"nouveau riche"/"tasteless"/"a philistine"), which will cause other wealthy people to break ties for fear of being tarnished by association. Since relationships with other wealthy people are a cornerstone of becoming and remaining wealthy, there is a massive incentive not to do this.
I think the underlying reason is that being patronised is very antagonising, and the poor generally outnumber the rich, who must ultimately depend on them in a variety of ways.
yreg
Convincing people to finance their groceries is absurd. Ideally, everyone should have a few months’ worth of income saved. And if they do, there's zero reason to finance a burrito.
In the Western world, if you have a job but no savings buffer, it’s usually not due to extreme poverty—it’s often a lack of basic financial literacy.
Klarna, et al. market in direct opposition to that education.
twoodfin
I finance all my burritos: It’s fantastically more convenient than cash, incrementally builds my credit rating, & I capture some of the efficiency surplus via rewards points.
The article makes the point that BNPL packages up almost the same product into a bite-sized, low-risk (for both the borrower and the lender) package, making it available to everyone. Indeed, that does sound like a good thing.
mmillin
> incrementally builds my credit rating
Most BNPL plans are not reported to credit agencies and therefore don’t build credit. But “financing” by paying with a credit card and paying the balance in full would build your credit, still with no interest.
justincormack
Its not an "efficiency surplus" that you get via rewards it is a monopoly surplus.
robocat
> everyone should have a few months’ worth of income saved
Do you have any friends that earn minimum wage? Do you understand the societal incentives that discourages saving anything? Have you seen what happens to minimum wage earners when they try to save?
Our society enables a few different niches before retirement age:
#0: out of work. Discussing this niche be dragons.
#1: $0 balance - spend money as you get it. Discourage savings by training people that saving doesn't help them (fines, thresholds, societal expectations). Can spend ~2 hours wages on pleasure for your 40 hours work. If you care for kids or elderly parents then expect to spend most of your spare money or time on them. Make sure that society blames the $0 workers for their state by saying "if they only did action Z then all their problems would be solved!". Society doesn't really encourage action Z.
#2: working to pay off mortgage. Requires tenacity, skills and often luck. Society makes the jump from #1 to #2 very difficult. A mortgage is one of societies ways to force savings. Those savings often taken away later in western societies (through different ways, including demographics, illness and means testing).
Need to avoid: https://www.astralcodexten.com/p/come-on-obviously-the-purpo...
My two examples are:
A) a friend working 40 hours, gets 1 hour wages (~$20) to spend on themselves after their bills (they don't buy tobacco or gamble, they might spend their $20 on beer). Not academically smart, spends any windfall money on unnecessary stuff. No car. Now retired. I'm not sure what society could have done to encourage them to become financially savvy?
B) single friend on benefit to bring up kids. Missing partner little help. Government applies thresholds to income or savings that heavily discourage both. They were good with money before kids. Most spare money spent on kids. Also spent some money on unnecessary stuff like new carpet or societaly encouraged addictions (smoking and wine). Couldn't spend money on many necessities (didn't find much time or $ spare). Old crappy car. Now kids are grown, they are working and much better with their money again.
As a financially sensible person, I'm unsure how I could have taught either to be better off financially. Their societal incentives were not aligned with that goal. Others might say they lacked the skills or lacked the drive. I suspect they both have ended up being better off by not chasing financial savings.
The weirdest part is that I have wealthy friends that are not making better decisions.
I'm not sure what the root cause of wealth differences actually are.
Context: I live in New Zealand, and I am a financially well off middle aged guy.
wodenokoto
I buy all my food on credit, using my visa credit card.
But more to your point, your examples are absurd. You set the bar ridiculously high.
Of course it is okay to buy a single car or a single apartment on credit, as a normal consumer. Getting finance is not the exclusive domain of large, corporate investments.
bcoates
There's two obvious "legitimate" reasons to use credit: to smooth out expenditure volatility (a big purchase like a house, an emergency) and to smooth out income volatility (a temporary lack of a job). If you are suddenly sans job and living on savings/unemployment/charity etc., but have a perfectly reasonable expectation of long-term average income much above your short-term situation, financing a burrito makes sense--you’re being cash-flow efficient (extending your runway, if you will)
Also, in my personal experience, a new job often brings various costs (food, clothes, transportation, relocation, etc) long before the paychecks show up. There was a time in the early 2000s where being able to klarna a tank or two of gas until my paycheck landed would have been extremely useful to me
nothrabannosir
If you can’t afford a luxury item, it is fiscally irresponsible to take out credit to buy it.
Credit is legitimate if you use it for an investment (or expense) which will get you higher returns than the interest payments. Not for luxury goods.
Whether a delivery burrito is a luxury good or a basic necessity is apparently up for debate.
windward
That's funny, because food it my primary example for credit in everyday life and is probably the first place you've used it. Whenever you go to a restaurant and pay after eating, you're using credit. Credit is more effective and more ancient as a medium of exchange than money is.
bluedino
Most people use credit cards vs debit card for daily purchases in the USA because it's a safer transaction and you get points.
intended
Yeah.
I get the argument for pricing risk. That’s a genuine improvement on the state of the art.
I dont get NINJA loans, because they represent an unfair fight - a sophisticated loan originator and sales team against people without the background and skills to judge that risk
fennecbutt
You're right, and anybody that tries to convince us otherwise is the enemy, or a friend of the enemy.
Now our world is all about maximum profit extraction. Interest.
How about no more public education, you get a loan for it. What, that's what your taxes pay for? Well, it's not enough, too bad. The masters say that you can't possibly pay enough tax to give your child an education. But they'll give you a loan for it, with interest.
Coming very soon to a reality near you. And I thought we were done with being peasants.
wyager
Expected debt levels are more a function of personal time preference/utility nonlinearity w.r.t. wealth than they are a function of ambient economic conditions. When broke people win the lottery, they usually end up broke again.
calmbonsai
"This logic doesn’t change just because the thing being financed is a burrito."
Yes, it absolutely _does_ change. One might as well go all the way and start offering Oxygen or Water bonds. The immorality masking as morality here is insulting--not related, mortgage-backed CDOs during the financial crisis and "Pay Day" loans.
There are many, many fundamental individual needs and items (economic "utility") that, while financialization of them makes sense at the large scale (flood insurance, natural commodities trading, municipal infrastructure), makes zero sense (and is even amoral) on the individual and small scales.
Put another way, many bulk-health statistics (BMI, Blood Lipids, Heart-Rate) are useful to track for populations, but make little sense (and is wrong-headed) to extrapolate-down to the individual.
Just because you can, doesn't mean you should.
ivanbalepin
Enjoyed the article, but the author was correctly questioned in the substack comments how is this any different than a credit card for the borrower and what justifies the "interest-free" myth here, since the BNPL payoff period largely overlaps with the CC grace period. To which the author responds:
> Credit card float only lasts if you pay the full statement balance by the due date
but that is identical to BNPL, it's only interest free if you pay it off, just like a credit card past grace period. So why repeat the "interest free" marketing slogan? yes, initially it is, and so is the CC grace period.
> consumers have to only forecast the next six weeks of their life
yeah, good luck managing timing on the payments if you have 12+ of these, and it's not uncommon to have that many! Especially if, as author mentioned, you are living paycheck-to-paycheck.
I guess a marginal benefit for consumer is soft-forcing them to pay it off instead of revolving. Another one, correctly, was less hit to the credit score unless and until the bureaus get their hands on all BNPL data at some point in the future. But there is really no magic here for the consumer.
aaaaaaabbbbbb
Assuming one has access to a credit card and is financially literate, I agree that using BNPL is a hard sell (never having used it myself). But there is a large population--the unbanked--that lacks access to credit cards. For that population, the choice is not between credit card and BNPL, but BNPL and cash.
I found the article's description of how BNPL structurally differs from credit cards interesting, as it is a reasonable explanation for how BNPL can serve the unbanked and still have functioning credit risk models:
> Even with adverse selection for BNPL, the underwriting is for each transaction, not for all monthly spending like that in credit cards; so if a consumer misses a payment, the BNPL provider can stop lending immediately, as opposed to the credit card company which has to underwrite the person’s full ability and willingness to repay their debts. This tech-enabled granularity allows for legibility and hence greater precision and predictability.
ivanbalepin
Yes, that's a good point. However, how much of this finer-grain lending flexibility translates into more favorable underwriting (to help cover the unbanked) is not clear. The author did not mention any data to that effect.
immibis
How does a person without a bank account repay their Klarna debt?
ivanbalepin
probably meant "underbanked" - has an account but credit shot so no cc's
aianus
You can pay the BNPL with a credit card to take advantage of both interest-free periods and get credit card points. There is really no reason not to use BNPL, even if you can pay cash.
flakeoil
Yes, there is. You take on a risk of forgetting to pay or that there is missing cash on your account so that the payment does not get done. Now you all of a sudden have to pay interest. And for what benefit, just to lend the cash for free for a month? What would you do with that cash for one month which is so profitable and risk free to compensate for the quite high risk of missing one of those BNPL invoices?
zug_zug
I think this would be more informative if it dropped all moral pretense and just talked about the economics objectively. If we’re gonna call a spade a spade, bnpl is one of a dozen services that extracts money from those whose judgment we doubt (like gambling, lottery, junk food?, drugs, overpriced status-symbol vehicles, or even “digital goods”).
bcoates
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)
pseudo0
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.
poincaredisk
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.
TwoFerMaggie
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?
dublinben
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.
mattclarkdotnet
Oh it absolutely does come with increased outreach. The BNPL providers have apps marketing deals to users
inkyoto
> 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.
me_me_me
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ToucanLoucan
Why do we have to discard the morals of a business to judge it "objectively?"
calmbonsai
You don't and you shouldn't. GaaP even has regs for "intangible assets" which, among other things includes "branding wrt prevailing market mores".
Retr0id
Because morality is inherently subjective
nine_k
Game theory has an objection, your honor!
Some kinds of mores are more cooperative, and some are more destructive, and especially self-destructive. The good is usually associated with more cooperative and mutually supportive traits, and evil, with destructive. The good usually prevails in the long term because cooperation is more efficient than destruction.
So yes, there are objective correlates in good and evil traits, even though they are rather statistical than unequivocally causal.
pc86
You state this as if it's a fact but I think most people would disagree.
If morality is subjective, then that means there is nothing objectively wrong with murder, rape, pedophilia, chattel slavery, or any number of things that most civilized people would find abhorrent.
I'm not even trying to make a religious argument about the source of some objective morality, I don't think it's necessary to solve that to answer the "objective v. subjective" question.
eli_gottlieb
Then where does the subjectivity come from?
ToucanLoucan
Then the judgement will vary based upon the person. That doesn't make it inherently less credible.
me_me_me
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rtpg
Your statement is pretty subjective! Not going to defend gambling but "junk food" and "overpriced status-symbol vehicles"? Digital goods as an entire concept?
You can think it's all for the stupids, but I'm not seeing how it's some objective truth. Even if you're some stoic who thinks spending money on leisure is just incorrect at a fundamental level, but I think you're going to find yourself in the minority there.
socalgal2
No, rather I think I can scrape by for the few days it takes to get ahead of the curve for something as cheap as a burrito and then next month I can afford 5 burritos for every 4+interest I could only afford before. Paying for a PS5 or TV on credit I can see because it might take me months to save. But saving for a burrito is arguably something I shouldn't even have to save for in the first place.
rtpg
To be clear I think the BNPL thing laid out here is Bad(TM), I just got there through my belief system about how society should be organized.
I do not believe that life is measured in how many burritos I can or cannot get access to, so the idea that not using BNPL means I'll get more burritos next month falls a bit flat on me.
simplify
To take it even further, why does being in the minority matter at all? Curious what your motivation is for mentioning that aspect.
rtpg
If you think that objectively spending money on leisure is bad, my claim is that you are in a minority with that thought process.
My implication here is not that being in a minority changes whether something is objectively true or not (it doesn't!). But I will outright say that I do not believe this, and I think that most people do not believe this.
Claiming to believe that leisure is bad objectively is, in my opinion, also a claim that you are "smarter" than the vast majority of people. After all, you have unlocked some reasoning to reach this, that other people seem to have missed. Do you believe to have unlocked some deeper truths through thought? Perhaps! I tend to assume I am far from the smartest person in the room.
Objectivity is the load bearing thing here, of course. If you merely think spending money on leisure is bad, then that's what you think. That can be one of your axioms in your belief system. Stating it as some objective fact is a much stronger claim, that I don't think really holds up to much scrutiny.
This is even before getting into the idea of "objective badness", which is a can of worms.
A lot of work to try and claim objectivity on your side, when the much easier "my belief system is like this, and from that I conclude this other thing" is a perfectly respectable argument when discussing policy preferences.
Added bonus of being honest about what part of your argument is just a belief system is you can then more quickly identify why you disagree with someone else.
qq66
> One reason is that someone’s or a company’s income doesn’t always align perfectly with when they want to buy things.
Financing should be used for things that provide value over the time horizon it takes to earn the money to fully pay for them. If you finance things for less than that time horizon, you just end up getting more and more underwater. If you finance something that delivers value for ~6 hours then you probably shouldn't be buying that thing or your fiscal solvency is really headed for the cliff.
twoodfin
What’s the source of this “should”, and why doesn’t it apply to the majority of businesses that finance the cash flow to sustain short-term operations?
coolcase
He brushes over ethical concerns of BNPL but draws the line at sports betting.
But BNPL by design encourages you to buy things you can't afford and complicates your finances with more timed bills to pay. It makes it more likely people don't budget well and form buffers.
A PNBL would be better, add 10% tithe to every purchase that goes to a checking account. Once that reaches $1k it overflows to an index fund.
He says it won't be like 2008 bundling this stuff up and that might be right or wrong. To be 2008 you need 2 ingredients: combined gambling and banking operations at the banks (a legalised FTX of sorts) and some liars in the system misrepresenting the risk. Maybe a 3rd ingredient is a crazy/frenzy driving up the gambling into the bubbled asset.
Veedrac
I've suggested a different take on PNBL in the context of gambling before, to protect people against addiction without outright making it illegal as is widely done today. The idea is if you want to gamble more than some unprotected quantity, you have to first allocate the money and leave it for a month or two. People with insufficient impulse control or financial security will find that hard, but light recreational users shouldn't be inconvenienced too much.
The same ideas can work for other things, though it's easiest to apply to predatory behaviour.
TwoFerMaggie
PNBL was a thing at some point (https://en.wikipedia.org/wiki/Layaway) but was rendered obsolete by the advent of credit cards. Seems to me like a personal austerity measure which becomes more popular in worse economic conditions. The cynic in me believes that there's more money to be made when you encourage people to spend less responsibly and with less financial literacy.
mbStavola
From the consumer pov, why would I opt for a PNBL option? If I have the money on hand, wouldn't I just make a regular purchase?
Not trying to be snarky, genuinely curious what the sales pitch is here.
ldoughty
That's effectively any membership service where you get a discount... e.g. Amazon prime, arguably... or Membership grocery stores.
Pay up front for benefits that are realized later, upon further action.
I have a membership with my local craft brewery that I love to frequent that similarly could be considered a PNBL like financial thing.
Arguably, it's also gift cards, though yeah, without any benefit, no one really buys gift cards for themselves.
roland35
Hey sometimes gift cards are on sale! So in effect a pay now buy later.
My favorite restaurant often has a Christmas sale on gift cards (something like $10 when you buy $100) so I'll get a few for myself.
apothegm
The sales pitch is for people who don’t have the money on hand. But hope they will later when their next paycheck comes in.
null
cousin_it
I'm beginning to think that consumer debt simply shouldn't exist. If you don't have money to buy something, don't buy it. If you don't have money for necessities (food/housing/healthcare), putting you into debt isn't the right answer anyway. A safety net is the right answer.
msm_
I agree, with exception of housing. Most people can't buy home with cash, and for many this is a necessity. But homes are an appreciating asset, which cannot be said about cars or food - this is an investment, actually. But for everything else - cars, phones, electronics, food, subscriptions, jewelry - I 100% agree. Consider two people:
* One person has $10k saved, invested into something safe and liquid. Then buys something for $10k, earns and invests that $10k back, and because of investing is a bit up (let's say now they own $10.3k)
* The other person borrows $10k, and repays $11k over time.
This buy-and-earn cycle will repeat, and each time the person that fronted $10k is $1.3k up (and due to interest, this is only growing with time). The difference quickly becomes staggering. Tragic, and a classic rich-get-richer situation. And the only difference is the starting $10k and some discipline.
blagie
Personally, I think we should have all rent-extracting industries nationalized.
Land, like in China, should be available only under a 99-year lease (perhaps with a modest homestead exemption). The government should own radio airwaves, natural resources, and banking. This doesn't mean that it couldn't hire private contractors to do the work (e.g. bidding on oil extraction), but Chevron and Exxon shouldn't own the oil field.
And I think the government should provide very basic, minimal, Soviet-grade housing free to everyone.
If you'd like your kids to have their own bedrooms, you pay. If you're happy with a 2-bedroom for a family of four (kids room, adults room), or dorm-style housing for adults, you can live there for free.
Having a free option would, in fact, drive costs down for everyone.
More broadly, we should rationalize what's nationalized. For example, a lot of parts of education make sense with a lot more open competition.
cryptonector
The U.S. has done something like this, which in the 80s was called "the projects".
monero-xmr
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Ekaros
House appreciation is a bad thing. Outside well inflation of replacement, but even there should be some depreciation with wear and tear and aging...
Rents not covering most of amortization would make lot more reasonable system to live in.
maxerickson
It's likely enough that 30 year mortgages contribute to asset appreciation more than affordability.
Which doesn't mean you get rid of mortgages entirely, but maybe don't have the main policy intervention in the market be like that.
cousin_it
I think without mortgages most people would rent or rent-to-own, rents wouldn't be dragged up by housing appreciation, and affordable/social housing would be cheaper to provide because of lower opportunity cost.
api
Housing being an appreciating asset is a social ill. It means that housing can never be affordable, and that as it appreciates it locks out progressively more people.
This is true unless wages are also always going up, which is not the case unless it’s all just inflation in which case nothing is really appreciating.
buzzerbetrayed
Aren’t mortgages the number one reason houses cost so much? If mortgages weren’t allowed, the price of houses would plummet.
s1artibartfast
I beginning to think we should have separate legal systems for different people. One where people have more agency and responsibility for the consequences, and one where they are treated like children, but taken care of.
There is actually a fantastic sci-fi novel I highly recommend written by a professor of enlightenment philosophy that uses the as part of the premise. too like the lightning by Ada palmer. [1]
cousin_it
Or you could have one system where people are treated like adults and taken care of. The risk of getting into unmanageable debt isn't any better than the risk of a car crash, it should be minimized, not celebrated. "I drive without a seatbelt because I'm an adult and can drive responsibly!"
Except it's even worse. A car crash is terrible, but at least nobody profits from it. With debt you create a market for manipulating as many people into debt as possible.
b59831
[dead]
hnthrow90348765
>Is financing your lunch a sign of societal decay? Maybe, maybe not.
I'd have no problems with BNPL if wages kept up with necessities like housing, tuition, and healthcare, or if those services were provided to citizens for free in exchange for higher taxes. Or even if minimum wage would move, like, at all.
What I think this is a better sign of is this: a very lopsided finance industry against workers and borrowers due to the fact that paychecks only arrive on a two-week schedule but burrito debt is freely available at any time. And when they stack fees on top of a burst of interest, it is really, really looking like they are becoming an enemy.
I hope they fuck up the implementation and end up losing money to hackers.
wyager
> end up losing money to hackers.
How do you imagine this would work for a company using normal fiat payment rails?
hnthrow90348765
Quite a lot of security problems are someone fucking up something they shouldn't have. But honestly I haven't a clue.
theamk
Imagine a validation logic error that allows an evil actor to pass credit checks with arbitrary personal details.
Hackers use this to make many orders using fake personal information. In BNPL, all losses are covered by the BNPL provider - so merchants get their money, criminals get random stuff for resale, and BNPL have to foot the bill.
RainyDayTmrw
A lot of financial schemes sound like they could be above-board on paper, but in practice degenerate out of control. Securitization is a classic here. It's not that securitization is inherently bad or wrong, but it creates a lot more surface area for incentive misalignment and outright abuse.
Consider the United States subprime mortgage crisis of 2008. I'm actually willing to accept that broadening the borrower base had the potential to be a social good. In particular, throughout the 1990s and 2000s, home equity was a very real way for middle-class Americans to accumulate family wealth, and expanding access to that at least had potential for positive impact. But the actual way that the mortgage industry went about it was maximally wrong. Every layer was incentivized to finagle the numbers to work out, despite that the fundamentals never did. Every layer, from the loan officers to the underwriters, all the way on up, were incentivized to look the other way while they took their own cut. Loan officers fudged numbers, underwriters fudged numbers, and so on. At the core of this conflux was the mortgage-backed securities (MBS) machine. A lot of the financial engineering involved may have been valid on paper, with some set of constants. But it was clear, at least in hindsight, that the banks, ratings agencies, and brokers worked together to stack too many bad assumptions on top of each other, until the whole thing burst. We all know how that story ended.
Is BNPL, and the securitization thereof, the next big trap? It's too early to say with confidence, but certainly the signs are there. I only hope that, if it's going to blow up, it does so early, before regular people's pensions start buying into BNPL-derived securities.
SOLAR_FIELDS
This treatise, from someone obviously in the industry, is merely another payday loan shark attempting to justify the existence of their clearly predatory products. How many of the consumers of this product are even remotely able to comprehend the piece as-is described? The article describes a "complete market". Yes, a market that is completely able to extract as much money from an exploited, uneducated populace as possible. Is that the kind of market efficiency we should be advocating for?
The part of the "free market" that these fat cats always gloss over is that a cornerstone of a free market is that the consumers of the market are able to make educated decisions about the products that are available to them. If the populace is incapable of doing so in the way the products are presented to them, is that really a free market?
tecleandor
It's unhinged.
> Is financing your lunch a sign of societal decay? Maybe, maybe not.
Financing your lunch means you can't pay for your lunch. And then somebody comes to search profit in that. Yep, it's societal decay.
Ah, but he draws the line at sports bets, he doesn't like that.
margalabargala
> > Is financing your lunch a sign of societal decay? Maybe, maybe not.
> Financing your lunch means you can't pay for your lunch. And then somebody comes to search profit in that. Yep, it's societal decay.
Counterargument: almost always when I buy something, lunch or otherwise, I put it on a credit card, which I pay off always before the due date but essentially never on the same day I had the lunch. Viewed through the lens of a society that only paid up front in cash, what I do would be viewed as risky and irresponsible; but it is not.
BNPL as it currently exists, in the form described in this article, is exploitative. But the American credit card system, which is the same sort of thing mildly rearranged, is far less exploitative.
pseudo0
The credit card company still takes a 2-3% cut, which absolutely gets passed on to consumers. You get part of it back in the form of credit card rewards and services (eg. fraud protection, charge backs) but it's still a tax on everything.
BNPL is worse, they take 5% and all you get is a small loan for a few weeks. Their whole business model relies on it being "free" for middle-class people who will pay back their loans, because the fee is hidden in the purchase price. This is an area where government regulation is actually required, all transaction fees should be disclosed and charged as a surcharge on the base purchase price, whether it's a credit card or BNPL, to provide a fair and competitive market for consumers and merchants.
eli_gottlieb
> But the American credit card system, which is the same sort of thing mildly rearranged, is far less exploitative.
Than what? Have we actually checked what the level of fraud is by credit-card companies, or how they price various cards for various customers?
thaumasiotes
> Viewed through the lens of a society that only paid up front in cash, what I do would be viewed as risky and irresponsible
Are you sure about that?
I would be surprised if a society that only paid up front in cash had ever existed. For example, "if you do something for me now, I'll do something for you later" is a much more basic form of interaction than "if you do something for me now, I'll give you this money" is.
Financing your meals isn't an exotic concept; it has normally been known as "running a tab". But running a tab involves periodic settlement of whatever the tab has run to. It isn't broken down into individual transactions each on their own detailed payment plan. This is something that doesn't make sense for small purchases.
drivingmenuts
Interesting, because sports betting is waaaay more voluntary than eating.
Eating is voluntary, if only for short while.
Spooky23
In the same sense as cigarettes. It’s a compulsive behavior.
sweeter
He doesn't want to admit to being the cause of the rot, it makes him feel bad (but not bad enough to not do it lol)
scubbo
Amen. It's been my experience that, for any innovation in financial technology, if you keep asking "and why is that beneficial?" for long enough, you will finally arrive (via tangents into "liquidity" and suchlike) at "it allows those with money to extract more money from those with less money".
blagie
I don't know that's quite true.
I've seen cases where it allows those with money to extract money from those with a lot of money too.
Take this situation:
Business A and business B are both doing well and competing with each other in a duopoly.
a) No credit: Each business needs to be in the black, and competition is sustainable.
b) Credit: Whichever business borrows more money to spend on buying customers is more competitive in the short term (which can lead to monopoly long-term). Both businesses run in the red are and brittle. In any downturn, tightening of credit, etc. both are liable to go under.
This competition to raise increasing amount of money to be competitive (to increasing devaluation and/or debt makes for a pretty broken economy), and makes traditional businesses (which invest in R&D from profits) increasingly unsustainable.
This even goes to government level. Historically, if e.g. two European powers were in a war, whomever could borrow more to buy weapons / hire mercenaries would have an advantage. Access to credit made for more costly, more deadly wars, and broken national economies. If neither side had access to credit, both sides would be strictly better off.
losteric
For the same reason, I’d argue mortgages are a bad thing for consumers by creating this prisoners dilemma around debt.
sologoub
In general, the availability of credit has been a positive economic factor that helps enable capital expenditures that otherwise would only be available to the wealthiest. Lack of such credit leads to capture of means of production and rent seeking behaviors in economic terms.
However, it’s become more and more clear that not all credit is created equal and what you spend the resulting capital on matters a lot. If one buys a house to live in or equipment to make money with - that’s generally good use of credit, assuming costs do not outweigh the benefits. I can’t think of a situation where buying lunch that one has to finance is a good thing (as different from credit card points harvesting/optimization). The implications of anything similar to payday loans going mainstream feels like a large societal risk.
Garlef
Exactly.
Key differences:
- Houses are gaining value over time while consumer goods such as food, phones, TV, cars are loosing value over time.
- A loan for a house can be paid back very slowly so that you effectively only pay your initial share of the price (and share the profits with the loan giver via interest). A loan for consumer goods must usually be paid back almost immediately.
tptacek
I have no idea what I think about BNPL products, but those "tangents into liquidity" basically eliminated most of the costs of trading. You can't negatively polarize me into thinking there's a social good to paying $50 to place a simple buy order; not having to do that is part of what "liquidity" means.
r053bud
Yes. That’s literally the economic system we have agreed upon in the United States States and continue to vote for.
tlonny
The product (from the perspective of the consumer) _is_ relatively straightforward IMO. What isn't straightforward is accurately modelling the credit risk of the bonds when this class of debt is securitized (the meat of this article). Thus I don't think understanding this article is a prerequisite for making educated decisions re: BNPL.
smallpipe
An industry of parasites, extracting money from people already down on their luck. Rats.
gtowey
Because the easiest person to extract money from is someone with no other option.
We are right back to feudalism.
ahajajakakaba
Usury is outlawed in many religions for good reason. This is a known problem with a known solution, but our society is run by billionaires who can put substantial capital to convincing the proles otherwise.
Simply bring up inflation is wrong and not necessary (outside of disaster, etc) and the US government should control its own monetary policy and not the fed. You’ll get downvoted and/or fed arguments from economists (modern day priests) about how wrong you are. And yet the wealth gap keeps growing while we’re the most technologically advanced and efficient we’ve ever been.
totetsu
If people can’t afford to eat then profitable business are not sharing enough of their profits with the people working for them, and unprofitable essential work is not getting funded enough. We should be ensuring people have an income that is enough to live off through minimum wages and job guarantees and when it comes to it a UBI, instead of letting people sell themselves into servitude with survival debt.
flakeoil
In the text there are no benefits for the borrower/consumer outlined. BNPL is basically just a scam to lure in people to use this easy option to pay and then charge them late fees and interest once they forget one of their bills. It's not even convenient (except at checkout) because you will get a bill to pay down the line and that's not convenient to pay.