This is why banks, credit companies are now afraid of buying, pay loans later

Buy now, later Pay plans are an attractive alternative to credit cards for consumers: they allow you to divide purchases into short -term, usually interest -free installments.

“The loan has not been new. The loan has been for thousands of years, and credit cards are not new. But it was difficult for them to adapt to the needs of consumers,” said Michael Linford, operational director of Affirm. “I think that what we currently see in the industry is the widespread acceptance of alternatives to credit cards.”

It is estimated that 86.5 million Americans have now used Buy, he will pay loans later in 2024, according to EmaralekAnd this number may increase to 91.5 million in 2025. questionnaire He stated that almost half of the Americans have now benefited from the purchase, to pay later, such as AFIRM or Klarna at least once, including 11%, who used the service at least six times.

“I think he is pushing parts of the credit card industry,” said Moshe Orenbuch, a senior analyst at TD Cowen. “Buy now, the payment was later created for people who either did not want to use credit cards or did not have much open [credit] Buy on your credit cards. “

“Every purchase that is financed through Buy Now, Pay later is a purchase that could be financed using a credit card or a check account, which offers that it will not be now,” said Kevin King, Vice President for Credit Risk and Marketing Strategy in Lexisnexis risk solutions. “This reduces the activity of the card transaction, use – these are the main income drivers.”

In addition to direct challenges they buy now, later loans are credit cards, large banks and financial institutions have other reasons to be careful for consumers who use these plans, especially as the number of users increases.

“Buy now, pay later, which has been represented by a giant black hole in the credit profile and their understanding of the quality of consumer loan,” King said.

Watch the above video to find out what is behind the popularity of Buy now, pay off later loans and why traditional lenders, such as banks and companies from credit cards, caution who use these programs.