TThe BNPL market is run by a small consortium of companies that we have seen in our web browsers: PayPal, Affirm, Klarna, Afterpay and a few others. Their goal, as at least stated, is to compete with credit card companies for consumer acceptance and to turn the “revolving line of credit” consumer model on its head. In other words, you want to replace the credit cards in your wallet, not partner with them. Their traditional model consists of four-part installments over six weeks, rather than paying the full price upfront. If you miss these payments, you’ll pay interest – but unlike credit cards, the terms are often more lenient, with some even offering 0 percent APR. And when these interest payments are actually paid, they do not contribute significantly to the BNPLs’ bottom line.
BNPL companies make money by charging merchants fees for using their services, typically around 3 percent on top of the normal 3 percent for credit card payments. Essentially, these are software companies in the payments industry, not credit providers. Every single transaction goes through an automated process without a hard credit check and is approved as such. BNPL companies have recreated an old financing system but shifted the risk from the merchant in the traditional point of sale system.
The loans are financed in various ways through banks and Non-Depository Financial Institutions (NDFIs) or private loans. For example, a BNPL can open a warehouse line with a loan fund and your purchase will be paid for in advance with their capital. Your repayments (receivables) are then bundled with tens of thousands of others in risk tranches. The private credit fund could sell this package to a pension fund or insurance company in search of short-term returns. Selling these asset-backed securities (ABS) recoups the fund’s capital for the next round of buyers. And merchants are willing to pay a premium on BNPLs because the transaction is over for them when the customer clicks “place order.” The American Marketing Association estimates that adding a BNPL option to an e-commerce site increases sales by 10 percent and increases cart size by the same amount. We buy more things at once and buy them more often when the price we pay today seems low.
What’s striking about all of this is the fact that Americans’ credit card balances today peak at over $1.25 trillion, and that number doesn’t include BNPL market share. Over 13 percent of all credit card accounts are more than ninety days past due. About a quarter of them have balances of over $10,000. Americans are running these credit card balances at record levels month after month, with record interest rates of 22 percent. Since the Great Recession, Americans have paid over $2 trillion in credit card interest alone. The connection between credit cards and BNPL usage often looks like one of two things: either consumers with low credit scores choose BNPL to achieve a similar goal; or credit card users who have maxed out their limit or are close to using BNPL as their lender of last resort.
Somehow we’re all barely surviving and living beyond our means – a fact that’s so rarely mentioned – on ridiculous amounts of money. The real victory of capital over us today lies in the apparent incomprehensibility of the question: “Can I afford this?” If our answer is yes, whether that is true or not, then capital wins. But when we consume too much, we lose track of what we are missing out on. A glaring and unfortunately common example is the bi-monthly article in the New York Times or Wall Street Journal that profiles an urban couple who earn more than $200,000 but feel somehow “behind”. They all say the same thing: We want children, but we just can’t afford it.
We talk a lot about inflation or corporate “greed inflation” and the way it steals our hard-earned money; We talk less about consumer seduction. It is said that we are living in an era of “deserving” post-pandemic; but discourse is a godsend for the bourgeoisie. What brings elements of both things together in the K-shaped economy is the use of BNPL for groceries, credit cards for car notes and Christmas presents, airline miles for travel, and points systems for purchasing Amazon items that we end up returning (about $1 trillion in returned goods last year). What differentiates them is not so much structural, but rather a relationship to vulnerability and purchase volume.
In our current cultural and political doldrums, capital thrives on the fact that none of us truly understands the terms of our own spending. How many times have you heard the refrain that Affirm CEO Max Levchin repeated recently: “The American consumer is incredibly resilient.” They say it like it’s a Purple Heart. On the other hand, the CNBC Squawk Box hosts will say we are “drained.” In either case, the economy cannot escape the fact that even after rebuilding its risk system after the Great Recession, it is still tied to the question of whether the average American, from bartenders to lawyers, can continue making payments on old items while buying new ones.
It seems we have escaped the liberal economists and sociologists who insist that marginalized Americans (most of us) understand their own budgets and therefore act rationally. They say this when discussing why, for example, low-income workers use check cashing stores instead of traditional banks because of how they calculate the spread between overdraft fees and payout rates. Whether true or not, it’s a form of false empowerment – and a way to avoid dealing with the fact that most of us don’t know what the hell is happening with our money most of the time. This leaves people across the income spectrum at risk of being overwhelmed and subject to false promises from BNPL companies that one plus one is somehow less than two.
https://jacobin.com/2026/07/bnpls-credit-financialization-consumers-affordability
