When you're buying stuff instead of paying the full amount at checkout.
Buy Now, Pay Later lets you split the cost into smaller installments over months.
It's become widely popular worldwide, according to a recent US report, especially among young women, who are more likely to use it, even though men still carry more overall debt.
With this shift in how we borrow and spend.
Is it a smart budgeting tool or are we sugarcoating a dangerous habit?
Coming to you live from Beijing, this is Roundtable.
I'm He Yang.
For today's program.
I'm joined by Steve Hatherly and Yu Shun in the studio first on today's show.
In china, e-commerce giants have been ahead of the curve on buy now, pay later, rolling it out in innovative ways and weaving it into shopping festivals, platforms and the everyday habits of millennials and gen z, those born in the 1980s and 1990s.
For many, splitting payments into smaller installments isn't just convenient, it's become second nature.
Meanwhile, in the US, the same service has taken on a different spin, marketed as quote-unquote cute debt to young women, with influencers and brands dressing it up in pink and selling it as something lighthearted and fun.
But whether it's everyday integration or playful packaging, the question remains are these services helping young people manage money or quietly leading them into deeper debt?
What is the state of the buy now, pay later market around the world right now?
So some stats are showing that Americans are increasingly using this kind of buy now, pay later services to finance purchases ranging from luxury goods to weekly groceries.
And this year this service is predicted to hit nearly 117 billion in transaction volume, thanks largely to young female buyers.
That's according to the American Media Marketplace report.
Also, Adobe's forecast showed consumers were expected to spend a record 185 billion through buy-now-pay-later financing in 2024.
That's up more than 11 than last year.
Around Three quarters of this spending happens on a mobile device.
Yeah, that's not surprising, is it?
It happens on a mobile device.
It's just so easy, isn't it?
It's late at night.
You can just imagine the situation for a lot of these purchases.
Not all of them, of course, but it's late at night.
You're lounging around on your sofa or in bed and you see a shirt that you want to buy something related to fashion, or some item related to electronics, whatever it is.
And you see, oh... well, I can't afford it right now, but I can do this little micro loan thing.
So yeah, let's just go ahead and buy that.
It's just so easy to see why this is very, very successful.
Yes.
And a 2024 study from the Boston Federal Reserve found that American women are 68 more likely than men to use these services, even though men have more total debt than women.
And you guys mentioned microloan.
I think just the way these services are being rolled out, sometimes it catches you off guard.
People don't really... necessarily understand that they're taking debt.
They sort of just feel like, oh, you know, I'll get the stuff that I really want now.
And the pain comes later, but you kind of forget about the pain.
This is the opposite of something that used to be really popular in North America.
I'm not sure if it was ever a thing here in China.
It's called the layaway system.
A layaway system is where you commit to buying the item, but you can't pay for it in full right now.
So it's the opposite.
Pardon me.
The company will keep the product, and you keep making payments until you've paid it in full.
And when you've paid it in full, then they will give you the product.
But they will hold it for you in the shop.
Why would they do that?
Well, it's guaranteeing a sale, right?
I think I did this when I was in high school for a pair of shoes that I really wanted, like a hot ticket item that if you don't buy them now, they're going to be gone.
But I couldn't afford to pay for the shoes in full.
So the shop I remember the shoe store said you can do layaway, which means we'll hold the shoes for you and you can complete the purchase in like three different payments and then you can take the shoes.
So aside from that installment, do you need to pay extra for that?
Because this sounds like a very...
Because you need to pay for that scarcity, right?
It is a kind of rare product that they need to save a spot for you.
Yeah, yeah.
And that's why it's kind of a weird system.
And I just looked it up before the show.
And that's why that system has largely died away.
Apparently, it still exists in niche markets like big ticket jewelry purchases, right?
If you're going to buy an engagement ring or something like that, then you can pay in installments and they'll hold that diamond for you or that watch.
But big retailers, they say, have largely moved away from that.
And one of the reasons they've moved away from that, I think, is because of this buy now, pay later type system.
Yeah.
What about here in China?
What's the sort of lay of the land in this department?
Yeah, this kind of service has been applied to many e-commerce platforms right now.
An article published by the account of monthly magazine Business China is showing that in November 2024, the e-commerce platform that is focusing on some of these.
Budget holding products called Pinduoduo.
They lowered the technical service fee for this buy now, pay later service from 1 to 06, covering all sellers in September 2024.
And also Taobao and Tmall announced that during their Double 11 shopping festival last year, all participating sellers would be provided with free access to this service, along with exclusive resource exposure to boost sales conversions.
And also JDcom, which is another e-commerce giant, also launched this kind of service and data showing that it has helped partner sellers increase their order conversion rates by about 10.
While some consumers are uneasy about losing control of the payment process, others believe that the service can make payment more convenient.
So what they did there, that's from the seller's point of view, right?
So these buy now, pay later platforms made an agreement with the sellers.
They dropped a rate from 1% to 6% as a service fee in some cases, and in other cases made it free.
So for the sellers, that's a big incentive, right?
To kind of promote that service.
Because with credit card fees, if you use a credit card at a store well, the store has to pay a certain fee right to have that system in place.
So this is just another almost sounds like better alternative for the sellers.
I suppose so.
And also, if you look at the Chinese market, it's you got to give it up, for you know those e-commerce giants, because the this buy now, pay later service is often rolled out by that e-commerce giant.
So Taobao JDcom Alipay, they all have their own sort of financial vehicle for this.
So you've got your Huawei, you've got your Baidiao and a whole bunch of these services.
I remember when they first appeared on the market about a decade ago, I was immediately worried because These services are seamlessly woven into the online shopping experience, where you've got a very young audience, young shoppers.
I'm talking about college students.
And I don't think you can be any younger than that to be able to use this service.
But it's so easy to use.
It looks so everyday, mundane people don't necessarily understand what they're getting into, was my worry.
Is there a, to get a credit card, to compare the two, you need to qualify to get a credit card.
With these services woven into the shopping experience.
Do you need to qualify for this, or is it just an option?
Yeah.
It is an option, but you need to be.
I remember back then I applied for this and didn't success because I was not 18 years old.
So it should be an adult to apply for this kind of service.
Yeah, and you need to qualify, but it's so easy to qualify.
Easier than applying for a credit card.
Yeah, anybody who's been using that app or that payment method for a few times can qualify.
And then these uh, incremental installments of payments can just be like 50 yuan, 100 yuan, as small an amount like that.
So you know um, the the easiness of it or the convenience of it could also be.
You know the double-edged sword with the other side being Well, people are just taking on debt, however small.
It might seem to be willy-nilly and we might need to look at the potential risk of that right.
For listeners who might not be all that familiar How exactly does Buy Now, Pay Later work, and how is it different from traditional loans or credit cards?
Yeah, so Buy Now Pay Later, let's call it BNPL for short.
It is a short-term loan and it lets shoppers pay for products in very small installments, as you just said, spread over a set period of time, and these services are typically used for minor.
They can be for expensive purchases, but they typically are used for minor cheaper, more affordable purchases.
And the difference between these and other types of loans is that BNPL loans they're typically interest-free and they rarely carry other service fees, and it makes them suitable for people who are on a really tight budget.
Some providers might charge a small service or convenience fee, but these are typically much lower than what you would pay if you compare it to interest charges on other types of loans.
Yeah.
And also consumers pay a small portion up front at the checkouts, like 25 of your whole price, and then pay off the remaining amount in installments over the following weeks or months.
For example, brands like Apple, Huawei and Xiaomi.
They offer interest-free installment plans when you're buying a product from their websites, some even up to 24 months, which means you can pay it off within two years.
It's like the layaway system, except You can get the product.
You take the product with you.
Yeah.
Yeah.
And if you miss a payment, you will be charged.
Yes, indeed.
And also two years.
Can these people really, you know, remember?
They will just be in the bill.
You will pay it like every month.
But you separate into 24 months, which means you're probably going to pay 400 yuan per month, which is like 56 per month.
It's suddenly become affordable.
Yeah, and that's the case where people will buy bigger ticket items, like a new television, right?
In the beginning, to pay it off all at once, that would be quite an expensive item.
But if you can divide that over 24 months, it makes it a lot more attractive for people who don't have that large sum of cash in the beginning.
And you said, oh, our people are going to remember.
Well, your bank account is linked to the payment or your credit card or whatever.
Right.
And it just, I assume, is deducted automatically, rather than you having to actually physically visit a shop or something like that.
Yes, that is true.
But I think remembering is still important in the sense of budgeting.
Yeah, because you, yeah right, maybe you have multiple platforms uh, providing this service and you've signed yourself up to it, and then can you remember like, adding all these monthly payments up, how much a big a chunk of money is gonna eat into your, your monthly income?
And i think, for people like myself who are not very good at math, This is actually quite difficult to remember.
Yeah, I mean, let's not vilify this kind of platform.
100 because yeah, I think it's easy to get in over your head like you're explaining.
If you go too far with too many apps, you can kind of lose control.
Track of what you've spent and more importantly, what you owe, right?
But with the world economy, the way it's been seemingly for a long time now, a lot of people, a lot of families, do live paycheck to paycheck.
So for things like groceries, if you can get a little help through a delayed payment plan, an interest-free payment plan, then these types of things can certainly be of assistance.
And they're really popular all over the world.
In Europe, back in 2005, in Stockholm, in Sweden, Klarna.
They became a global leader in this BNPL sector.
That company serves 150 million customers.
They do it over 45 different countries.
They partner together with 450,000 different merchants.
And their approach includes a shopping app that they've established.
They've got price drop notifications.
They have a rewards program.
It's called Vibe.
So that's a successful example.
Another one.
This is from America.
It's called Affirm.
And this was actually founded by the PayPal.
If you know what PayPal is, it was founded by the PayPal co-founder.
His name is Max Levchin.
And that company has become a leading platform, BNPL platform in America.
And their service is integrated with major retailers.
They work together with Amazon and Walmart and Target.
Target's like a similar company to Walmart, I suppose.
And they offer these customers flexible payment options through their purchases.
Well, in the US, the service has even been branded as cute debt and targeted heavily toward young women.
Well, this was reported by Annie Joy Williams at The Atlantic and she sort of called it the rise of cute debt.
Why is that, and what makes this group such a focus?
So they target women-oriented retailers.
Lots of these online shoppers load up their carts, but once they see the total costs don't follow through and companies such as Afterpay pitch themselves to merchants by saying promising to solve this issue of cart conversion.
Shoppers are more likely to click pay now if they have the option to pay less upfront.
An associate professor at Newcastle University called Jessa Loomis in England is an expert on these companies.
And she said the companies make their real money not from the fees they charge consumers, but from what they charge the retailer or merchants to be able to have this kind of buy now, pay later service.
Yeah, so their payment.
So this is where these platforms are actually not targeting the young female customers.
They're targeting the stores that the young female customers shop at, because what they're basically saying is we can bring these, we can bring this demographic to your store, Right.
Because if you're, if you're giving deals to the customers and those deals are embedded into the platforms, online shopping experiences or apps, then it makes it a lot more comfortable.
You mentioned the term.
What was that term again?
Cart conversion.
Right.
So what that means is a lot of times shoppers will put a bunch of items in their online cart and then they'll get to the end of their experience and they'll go to click pay and they'll go oh, oh.
I didn't realize it was going to cost that much.
And they won't follow through with the purchases because they have to pay for everything at the same time.
When these types of platforms buy now, pay later are embedded into the site, say oh, here's your cart.
It is quite expensive, but you can do interest-free for a few weeks or a few months.
That's that cart conversion, taking the full cart converted into sales.
And this is why it's really attractive for the businesses selling items.
And that's why these platforms are targeting the businesses.
Yeah, that's very interesting.
And the part that sort of caught my eye, and also caught the eye of the journalist, was when she heard, for example, this slogan little payments are just so much cuter.
Yeah, this is just obvious, isn't it right?
And then the journalists immediately realized that this ad was not made for a man and it's made for somebody like her, a young woman in her 20s who's drowning in credit card debt and keeping trying to keep up with the Joneses online and offline.
And then the, the gender aspect of things I think interesting in the sense that men and women might be seen, or maybe we do shop kind of differently, because if you look at the female demographic, often we're seen as the day-to-day shoppers, because a lot of the household groceries clothing, a lot of these everyday stuff is bought by women.
And for men maybe they're not always, but traditionally seen as they're the biggest uh, more expensive items that they're gonna buy in their lifetime is a car and a house.
So it's interesting how that's all marketed differently.
Uh, just to capture the right to bring the right consumer to the retailer um, the company afterpay, They have murals in Los Angeles and New York that feature illustrations of cute strawberries and ice cream cones.
And the tagline, yeah, I mean, these are the murals.
This is a loan company.
And these are murals.
These are paintings.
And the tagline is this.
Using Afterpay is like eating the whole carton and spending the calories out over six weeks.
So they're making a food reference and a diet reference.
And assuming that men don't count calories the same way as women do.
I mean, to me, obviously, is targeted towards calorie counters.
Right.
So that's the type of marketing that they're doing.
Look at the term cute debt.
When does that not raise a red flag right there?
When have you ever seen the word cute in front of the word debt before?
That's what I said.
That's why I said it's just so obvious what they're trying to do with their marketing.
So I was thinking one thing is that these kind of payment companies, they're collaborating with some shops.
With some celebrities too.
With some celebrities.
And also their target audience or their target consumers are female.
That's one thing, right?
Right.
And another thing is that I was thinking one question first do you use like credit card or like advanced consumption?
You know my answer.
And Yushun and I, we belong to separate camps of ideas and financial habits here.
I do not use any advanced payment or consumption methods, solutions whatsoever, so not even a credit card.
Yeah i, and i use like, these kind of advanced consumptions a lot.
So, but from my experience the females like around me, they like they don't use that advanced spending that very often or um, they may tend to have more ideas when it comes to finance and money management when, when they are purchasing something so that's kind of you should, you're surrounded by or or you've met um, very rational female spenders.
Some of the reasons are they think it is kind of troublesome or you need to calculate more when you make these kind of purchases.
So, like based on my stereotype on men though, of course, not necessarily true they they, of course they may spend, spend more time on financing or managing their funds or something like that.
So I was wondering if those sales tactics are because the mail market is already relatively saturated.
I don't want to sit here and make it sound like young female shoppers are incapable of making good financial decisions, because that's not what we're saying at all.
We're only talking about the marketing here.
I think it's pretty obvious.
And that's what the journalist wrote about in was it The Atlantic that this is quite obviously targeted to young female shoppers.
And the reason is because in those retail stores...
And here's another example, the Paris Hilton example.
Klarna, they paired up with Paris Hilton.
They created what they called this House of Y2K.
And it was this interactive pop-up that was devoted to millennial nostalgia.
And they were selling a limited edition Paris Hilton times or ex-Klarna velour tracksuit.
So...
That's obviously targeted at young women, right?
So I think that's the point that we're trying to make here is like to whom are they marketing towards?
We're not trying to say that the group that they're marketing towards is not capable of making good decisions.
And also just stepping back a little, we can see that young people around the world have embraced this way of spending so quickly in a matter of, let's say, a decade or so.
Why do you think this is happening?
Well, some could use it as a budgeting tool, right?
The group that I spoke about before.
If you see where your money is going exactly and you know that your payments are interest-free and you are the type who does stay organized and on top of things and you know exactly what's going where, when and why and how, then this actually is quite a useful tool for a lot of people.
And I think the key word- And that probably is you shouldn't.
Let me just jump in quickly, as we were talking about this right before the show.
And he's read the fine print.
He's He's got his cars and apps all very organized and they belong in one interface on his phone.
And as we were doing a quick survey before coming on to the show live, one other coworker is not as organized.
And he did not realize that when he's paying the bare minimum of the monthly repayment, he's actually being charged.
Although a very sort of fraction, a small fraction of the total price, but he's still paying extra.
And he didn't know that.
So you got to be super organized and alert about To stay on top of things.
And you were going to say something you should.
I wouldn't say you need to be super organized.
It's just remembering you need to pay off all of the money that you just used.
Right.
And.
Yes, interest-free is the keyword in this scenario, I think, when you are using these kind of services.
And the selling point is interest-free.
When you have that opportunity to pay that whole amount of money in a period of 24 months without paying extra, I think that is great the way, or that is thing that people are interested about, because they I mean when you are doing the calculation you have that amount of money in your hand.
Maybe that interest in your hand can be totally much more than the way that you just spend it right away right, so that is actually also creating interest for you.
So was thinking that is also one of the reasons that people are using these kind of advanced consumption, because when you are having these kind of interest-free services and also when you are using, let's say, credit cards or these buy now, pay later services, they will give you lots of like payment discounts in some way, because they are encouraging you to use this service and maybe accidentally you forgot that is the scheme right, you accidentally forgot, and then You pay the extra interest fees.
I'm kind of torn because, as I said a couple of times, it can be a useful tool for people that need it.
But the problem I have is with the marketing.
Cute debt.
It seems like they're trying to fool people.
There's nothing cute about debt.
And debt can spiral out of control very, very, very, very quickly.
And if the target market is young people, young women without a lot of financial experience, and these tools are embedded into the shopping platforms, it's very easy to accumulate that debt over time to a point where you can't handle it anymore.
Debt is something that I wish I had learned about this a lot better when I was 13 14 15, 16 years old.
The more you know about this when you're young, the better you can try to avoid it.
Debt isn't something that you want to necessarily bring into your life.
Particularly if you're, when you're using these services, I sound like such a dad right now.
When you're buying something that you don't have the money for.
Don't buy the thing.
That's just generally good advice.
There are exceptions.
Yeah.
From a personal finance point of view, you can say that not all debt is bad.
Good debt helps you build value or generate future income.
Well, the first example might actually be a little controversial.
Student loans in the U.S., Canada too.
In theory, it should be good debt, right?
Because you're going to work hard and get the degree.
But now you see a lot of American universities closing doors simply because they can't get enough enrollment.
And there's this major debate happening in the US and other Western countries when tuition is so expensive, whether it's worthwhile or not, but anyway.
Traditionally it's been seen as good debt, and also mortgages such as buying a home that can appreciate in value, or maybe business loans so you can find, so you can fund, a profitable venture.
But bad debt is really obvious too.
Bad debt are used to buy things that don't increase in value and may create financial strain.
Credit card Overspending on fast fashion gadgets or dining out payday loans with high interest and BNPL, used impulsively for items that you simply cannot afford, can go into this category.
I think it's just very important.
And you mentioned it.
You said it really well, Steve.
I think this is part of financial literacy that everyone should...
We're lucky if our families can provide that for us.
But it's also just about knowing what you're getting into financially.
Knowing what you're getting into.
Because a credit card can be a good thing too, right?
It can help you establish a good credit score over a period of time when used responsibly.
But that's the key, right?
Use it responsibly.
Yes.
So finally, looking ahead, what can platforms, regulators and consumers do to make sure that perhaps buy now, pay later stays helpful without becoming harmful?
First of all, for the platforms, of course, that very obvious terms that need to be shown and informed to consumers and activated and turn off easily is a key thing that consumers need to know.
And also I think the the cautious of consumers is also very important.
As you said, you need to be like super aware when you're spending all of this money.
Of course, that can easy or weaken the sense of you are having a debt when they're using all of these terms like Q debt or Huawei.
Actually, Huawei in English is just spend it.
Isn't that a great name?
I did not know that until right now.
So people are using these kind of terms, but consumers need to be aware of all of the amount of money that you just spend on different platforms and accumulate them.
And also, I think, a very good trick is that, as Steve said, you can use all of these buy now, pay later service, but you need to have the ability or amount of money to pay off them right away.
So i think that is one thing when you can use these services safely.
Well, buy now, pay later can help manage cash flow, but only if you stay aware, organized and don't treat borrowing as free money.
