How consumers really feel about 'buy now, pay later'
Good morning, and welcome to Protocol Fintech. This Tuesday: consumers’ real feelings about “buy now, pay later,” a new crypto PAC and Starbucks’ NFT play.
Off the chain
Is fintech fashionable? I probably thought too hard about the pink paisley and khakis combination I wore to moderate a panel at the SALT conference in New York Monday. My panelists’ looks ranged from Nazar Khan’s natty wool jacket to Jameson Nunney’s black T-shirt. But the most eye-catching outfit had to be incoming Bullish CEO Tom Farley’s purple corduroy jacket from Rowing Blazers. He wore it, he explained to me, lest he be outshined on stage by Galaxy Digital’s Mike Novogratz. The couture clash spoke to a cultural collision: Wall Street and Silicon Valley, investment banking and crypto. Everyone’s trying to send a message, but no one shares a vestimentary argot anymore.— Owen Thomas (email | twitter)
Consumers are buying ‘buy now, pay later’
There are a lot of misconceptions about “buy now, pay later” companies if you ask Penny Lee, CEO of the Financial Technology Association. The fintech trade group offered an early look at survey data it commissioned from Morning Consult about pay-later products. According to the survey results, all that hubbub you’ve been hearing about consumers souring on “buy now, pay later” amid a recession just isn’t true.
If you’ve used “buy now, pay later,” you get it and you love it. Of survey respondents who have used one of the pay-in-four credit services, 94% said they clearly understood the terms and conditions, according to Morning Consult.
- Only 35% of adults generally have a favorable opinion of “buy now, pay later,” but 79% of adults who have actually used the services have a favorable opinion. Haters are rare: Fewer than 5% of users have strongly negative perceptions of the services, and that held across ethnicity, income, age and gender.
- “One of the things that we have heard consistently from some of the consumer groups is that users do not understand the terms and conditions and so it’s potentially trapping them in a debt situation unknowingly,” said Lee. However, “the information that we found in this poll was more confirmatory — it’s what we hear on a daily basis from what BNPL companies are saying about the products and the users and how they interact with it.”
- Notably, the survey addressed respondents' perceptions of “buy now, pay later” rather than quizzing them on the terms and conditions themselves. A different Morning Consult survey showed that one in five “buy now, pay later” customers missed a loan payment in January, suggesting that at least some consumers are unprepared.
An increasing number of customers are using “buy now, pay later” for essentials. Groceries and food were bought now and paid later by 14% of respondents, while 13% used pay-later for health care and 12% used it for car repairs.
- “Buy now, pay later” is often associated with customers splurging on items a bit outside their price range for stay-at-home comforts during the pandemic, like Pelotons or upgraded kitchen appliances. But as customers tighten their belts, they’re stretching out payments more for things they need.
- A New York Times article pointed out that more customers were starting to “eat now, pay later,” causing some backlash. But pay-later companies are leaning into the idea, framing the issue as customers using the payment products for increased financial stability when times are tough — not going into debt for food.
- “Using multiple BNPLs has made it easier for consumers to pay for their purchases,” the survey’s authors wrote in a summary. Consumers were also asked generally about their financial outlook for the coming year and whether they’re worried about paying for gas or food.
- Both respondents who do and do not use “buy now, pay later” were equally likely to say they are worse off financially today than a year ago, suggesting the services aren’t adding to financial precarity.
Interest rates matter. The largest segment of respondents, 45%, said that low or 0% interest rates were the most important features of “buy now, pay later” offerings.
- About one in six adults reported that they liked the flexibility of the payments, while 15% liked the “easy-to-understand” terms and conditions and 11% said they liked transparency.
- That’s despite often-repeated statistics that suggest a lot of consumers use credit cards to fund their pay-later payments. When asked, Lee refuted this assertion, saying that FTA’s internal data shows that 85% of BNPL customers use a debit card — and that those who use a credit card are doing so to accrue perks like points.
Lee is speaking at a Senate Banking Committee hearing this morning on the topic of how new consumer financial products impact workers. Several of the speakers, including the FTA, say they expect the hearing to center on “buy now, pay later” and earned-wage access products. Rachel Gittleman from the Consumer Federation of America is also speaking, and will likely express some of those arguments from consumer groups that Lee alluded to in Monday’s meeting, like the concern that “buy now, pay later” customers are being duped into debt. George Mason University law professor Todd Zywicki and Towards Justice executive director David Seligman will also speak. Consider the hearing a chance to survey Congress on how it feels about these fintech products.
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On the money
The brother of an ex-Coinbase manager pleaded guilty to insider trading. Nikhil Wahi admitted during a virtual court hearing that he made trades based on confidential Coinbase information in what U.S. prosecutors have called the first insider trading case involving cryptocurrency.
Fidelity is considering adding bitcoin trading. The brokerage is weighing a plan to allow individual investors to trade bitcoin on its platform, expanding its foray into crypto.
On Protocol: The Merge is almost here — so what will happen with all those mining rigs?
Starbucks will offer an NFT loyalty program on the Polygon network. The company's Starbucks Odyssey will allow customers to purchase and earn digital collectible stamps in the form of an NFT that offer benefits and immersive experiences. It remains to be seen whether that can provide a jolt for the struggling NFT market.
Goldman's credit card business is getting hit with rising losses. Goldman’s cards, which includes the Apple Card, have a 2.93% net charge-off rate, CNBC reports, far higher than JPMorgan’s or Bank of America’s rate despite being far smaller than those issuers' portfolios.
Abra aims to be crypto's first regulated depository bank. CEO Bill Barhydt said at the SALT NY Conference that the company hopes to launch the bank next year.
Mercury is adding a corporate credit card. The new offering places Mercury, a provider of banking services for startups, more directly in the heated competition to provide corporate cards to tech firms.
Crypto goes to Washington
The Blockchain Association has launched a political action committee to support “pro-crypto” candidates seeking congressional office, the group said Monday.
The move by the crypto lobby organization underlined the industry’s bid for a stronger presence in Washington, where it faces heightened scrutiny from lawmakers and regulators.
The Blockchain Association said it will support candidates “from across the political spectrum,” noting in a statement that “crypto is, by nature, nonpartisan.” The organization said it plans to endorse candidates in the upcoming midterm elections. The Blockchain Association’s “hope is to donate roughly 50% of the committees’ funds to Democrats and 50% to Republicans,” a spokesperson told Protocol.email | twitter)
Miami business lender Boopos raised $58 million in a series A round. Bonsai Partners led the round, which had $8 million in equity and $50 million in debt, while Fasanara, Actyus and K Fund also participated.
Corporate spend management firm Mesh Payments raised $60 million in a series C funding round led by Alpha Wave. The fintech recently reported approximately $1 billion in annualized payment volume.
Nigerian payments startup NowNow raised $13 million in a seed round. NeoVision Ventures led the round with participation from DLF Family Office and Shadi Abdulhadi.
Web3 infrastructure company Mysten Labs raised $300 million in a series B round led by FTX Ventures, with participation from a16z crypto, Jump Crypto, Binance Labs, Coinbase Ventures, Circle Ventures, Lightspeed Venture Partners and others. The company developed the Sui Layer 1 blockchain.
One-stop checkout company Bolt will no longer proceed with its planned purchase of Wyre for $1.5 billion. It would have been the largest-ever merger for a crypto company. A source told Axios the final decision was made by new Bolt CEO Maju Kuruvilla.New York-based office leasing and management technology firm VTS raised $125 million in a round led by CBRE Group. The investment is seen as a bet on workers returning to the office.
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Thanks for reading — see you tomorrow!