Klarna, a necessary evil?

I read this article last week about Klarna, the Swedish « Buy now, Pay later » company. The BNPL segment of the fintech industry is now well established with Affirm being the first one to have popularized the business model in the US.

I never tried the service, but Klarna is making the rounds following its planned IPO for the fall (you can read the excellent S1 analysis from CJ Gustafson).

Some people think that this new way of buying things is evil, and the article is making a reasonable case on the danger of accumulating debt through this payment method. It’s difficult to get a clear picture since those BPML companies are not reporting any activity in credit bureaus (this is going to change in the near future).

The problem with this article is that it stays on the anecdote, but even then, we don’t get any figures on how the BPNL purchases are affecting the budget of those people, what rates are charged when you start refinancing the debt you accumulated with them, etc. I left hungry for more.

The BPNL movement is not a revolution per se; like credit card fees, the cost is borne by all the customers of the merchant. For the latter, this is a (costly?) way to enable marginal sales since it can nudge people to shift to the left the buying decision or make purchases they would not have done without this credit facility.