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Affirm, Klarna, and Afterpay - in just 5 years, these 3 companies have popularized a new form of consumer spending called Buy Now Pay Later. BNPL is a type of short-term unsecured personal loan where instead of paying the full price upfront at checkout, you can defer the cost of any item by splitting the payment into smaller installments over time. If you want to spread payments out over a longer period of time to make the installments even smaller, you’ll have to pay interest. And if you miss a payment using BNPL, there are penalties with late fees, collections, and lowered credit score.

What Klarna, Affirm, and Afterpay have done is they’ve broadened the purpose of short-term unsecured personal loans from large one-time essentials into everyday, impulse, and splurge purchases. They’ve made it easy for anyone to borrow money, simplifying a historically opaque, time-consuming process of applications and manual underwriting into a scalable UX that provides instant credit in just a few taps. Most of all, there’s instant gratification. With Affirm, Klarna, or Afterpay, you get your order delivered right away on or before your first payment.

Putting aside fundamentals, BNPL itself is controversial. To critics and regulators around the world, it promotes irresponsible spending and enables overconsumption. In this episode, we’ll explore the business model of BNPL, its eerie similarities to the 2008 subprime mortgage crisis, and why that matters now more than ever in the coming recession.

🎧 Audio Editing & Mixing Credits: Sonalf

0:00 The Rise of Buy Now, Pay Later
6:01 Generational Tipping Point
11:58 House of Mirrors
19:32 Castles in the Sky
24:12 The BNPL Flywheel
30:43 Of Their Own Accord
36:47 Boiling Frogs