You’ve probably noticed it by now: You’re shopping online for some makeup or a new pair of running shoes or a water table for your toddler, and when you go to check out, you have a new option — why not break up the cost into four payments, made over time?
US consumers, especially Gen Z and millennial ones, have been embracing “buy now, pay later” services like Klarna and Afterpay with gusto the last few years. It’s not hard to see the attraction: Unlike a credit card, most BNPL plans don’t carry interest, and they generally don’t impact your credit score (though that is now changing).
On social media people tout BNPL as a way to buy stuff you want but don’t have the cash for right then — or maybe ever. And that’s starting to show up in the data: Leading BNPL company Klarna — which recently partnered with the food delivery service DoorDash, spawning a thousand memes — saw its net losses from consumers not paying their loans more than double in the first quarter of this year.
All this has Kyla Scanlon worried. Scanlon is an author and economic commentator, best known for breaking down economic issues through blog posts and videos on social media. In a video she published shortly after Klarna announced its partnership with DoorDash, Scanlon called the rise of BNPL a symptom of our “poor-impulse-control economy.”
“What I worry about is that the convenience and the impulsivity that it allows for allows for the expansion of the grift economy, of a world where people are spending money on things that they don’t need to and they’re just totally lost in that cycle,” Scanlon told Today, Explained co-host Noel King.
Scanlon talked to King about buy now, pay later, Gen Z’s relationship to debt, and what financial responsibility looks like in today’s economy. Below is an excerpt of the conversation, edited for length and clarity. There’s much more in the full podcast, so listen to Today, Explained wherever you get podcasts, including Apple Podcasts, Pandora, and Spotify.
You’re a commentator, you’re a public intellectual, you’re also a member of Gen Z, and you speak directly to Gen Zers who are operating in the economy. How are young people using BNPL?
A lot of Gen Zers have had very common interactions with debt. Student loan debt is a big part of the life of a Gen Zer. Medical bills, anything involving a credit score. Debt has been so normalized for the younger generation that when they see something like BNPL, it’s like, “Oh, this is just casual debt.”
For young people, they’ve been raised in the shadow of the 2008 crisis and student loan debt. It’s just what they do with their money.
This is interesting, that debt has always been available to Gen Z. If you’re an older millennial like I am, that’s not really the case. You might remember getting your first credit card when you were 22, but there was no Apple Pay. You couldn’t just pay for stuff on your phone.
And it strikes me that my nieces and nephews who are teenagers, they can do that. They have this ease with paying for stuff and taking on debt for stuff that never occurred to me when I was young.
A lot of that is structural. In 2020, the government sent out unemployment checks. In 2021, the Fed had rates really close to zero. We’re always talking about the deficit. We’re always talking about how much money the United States as a country owes. And so I think for everybody, they’re looking at that and they’re like, If the government owes all this money, surely I can have a little bit of debt, too.
And then credit scores have become such a core part of the American identity. It really informs a lot — how you can buy a house or if you can even get certain loans. I think people view debt as structural to themselves as a person, and that’s increased. And I think it really has a lot to do with the environment that Gen Z has grown up in and the fact that these tools are so readily available and they’re so easy to use.
Talk to me a bit about debt. Is it dangerous?
When you look at debt systemically, it’s not inherently a bad thing. Like most things, it’s a tool. Like social media, you could say it’s bad, but it’s just a tool. It’s all about how you use it. Same with debt.
BNPL in itself isn’t evil, especially if you can pay it all off without having to face those high interest rates. Credit cards themselves aren’t evil. But it’s really about the system that encourages these sorts of products to be created.
Real wages were stagnant for a really long time. The entry-level labor force has really deteriorated. It’s very tough to get a job right now. If you’re graduating from college and the college wage premium has eroded quite a bit, rent is high because we don’t build enough housing. Groceries are up. People are looking at the very high prices, the impossibility of ever buying a house, the struggles that they might be facing in the labor force.
It’s like, Well, sure, it might be irresponsible to use BNPL to get a moisturizer from Sephora, but what else am I going to do? I don’t see a solution before me. And so I think that’s been the big thing with debt — we’ve used it as a tool in order to navigate some of the hairier parts about being in the United States right now.
I think historically you might say, Look, you can’t afford the Sephora lotion right now, why don’t you just wait? And it sounds like what you were saying is that’s a bit of a privileged or maybe old-fashioned idea of how paying for things works.
Right! I think, “Why don’t you just wait?” ignores some of the ladder issues that we’re facing as Gen Z, younger people — even millennials, in some capacity, are facing this broken-ladder problem where they could wait to buy that moisturizer, but that would require the entry-level labor market to free up again, that would require wages to really speed up, that would require the housing market to normalize.
So I think a lot of people blame younger people for using debt and using BNPL. And you should be careful — I don’t think you should be living above your means in an extravagant way. But it really is a psychological buffer of sorts, where people are just like, Well, I don’t know what else to do, so I’m going to go buy this thing.
It is an element of instant gratification, the same thing that we see in social media, but for Gen Z-ers and younger people. There isn’t that stability, that expectation of stability in the traditional sense. And so I think these little small luxuries matter — buying that moisturizer matters because it is indulgent in a certain way, but it’s also an act of agency in an economy that doesn’t feel like it’s allowing you into it.
It does feel like there is some American ethos here that says, To live is to be in debt, and we’ve all accepted that.
I mean, that’s the only way you can get by sometimes. There’s that misquoted statistic about living paycheck to paycheck. It’s not 60 percent of Americans living paycheck to paycheck. It’s far lower, but I think a lot of people just feel like, one wrong move and the whole thing could come tumbling down.
And so we have these issues that are outside of the realm of consumer packaged goods being delivered where we have to really start thinking through actual solutions to these problems, because they’re not going to fix themselves. The incentives are too misaligned.
