金融

2025-09-04 Giving credit: the rise of buy now, pay later

2025-08-04 Buy now, pay later is taking over the world. Good

Worldpay, a payments firm, suggests that BNPL accounted for $342bn in spending around the world last year, up from just over $2bn a decade earlier. Older financial firms, such as JPMorgan Chase and PayPal, have entered the market, just as BNPL companies are taking on tasks that were previously left to banks. The opportunity for BNPL in business-to-business loans—a fragmented, old-school market—may be even larger than that for consumers. And a new market is emerging for portfolios of BNPL debt, which are securitised and bought up, often by asset managers.

When a customer buys a product for $100, they can pay in stages. The BNPL lender—perhaps Klarna(KLAR), a Swedish company, or Affirm(AFRM), a large American provider—pays the merchant upfront, in exchange for a cut of, say, $3. This is attractive to retailers, since it boosts sales. Customers with access to loans spend at least 20% more than those without access, even as the sticker price stays the same. The customer pays back the sum over time, often six weeks, in four instalments and with zero interest.

In countries where BNPL has been around longer, it contributes to more sales: over one in five of those made online in Sweden, against less than one in sixteen in America. Local and regional firms are popping up to offer the service: Addi in Colombia, Atome in Singapore, Tamara in Saudi Arabia.

2025-02-20 Why American credit-card delinquencies have suddenly shot up

Recent data published by the Federal Reserve Bank of New York show that the proportion of American credit-card debt in serious delinquency—with balances at least 90 days overdue—surged to 11% in the final quarter of last year (see chart 1). That figure has risen by four percentage points over the past two years and is back to a level last seen 13 years ago, when unemployment was twice as high as it is today. The proportion of overdue debt for car purchases has climbed, too, to a four-year high of 5%.

Rising interest rates are part of the explanation for the struggles of American borrowers. The average rate on credit cards has risen from under 15% in 2021 to over 21% today, the highest in modern history (see chart 2). Whereas homeowners are protected from rising rates by extremely long mortgage maturities, credit-card borrowers feel them almost immediately.

The current rise in delinquencies is concentrated among a group of particularly overextended borrowers, who stand out on three counts: for their age, location and creditworthiness.

Much like Mr Hammer’s guests, the cohort skews young. Some 11% of borrowers between the ages of 18 and 29, and 9% aged between 30 and 39, fell into serious delinquency in the final three months of last year, compared with just 5% of those in their 60s.

Debt strugglers are most likely to be found in the poorest parts of America. According to Juan Sánchez and Masataka Mori, both of the St Louis Fed, the share of people with credit-card debt at least 30 days overdue in the least affluent tenth of American neighbourhoods rose by almost seven percentage points, to 18%, from mid-2021 to the end of last year. The share in America’s richest tenth has grown by under two percentage points, to 6%. As such, the gap between the two is the largest it has been in at least 25 years.

Delinquency is also concentrated among subprime borrowers, who have lower credit scores. Indeed, research by Jordan Pandolfo of the Kansas City Fed finds that delinquency rates among prime borrowers have not risen at all in recent years, and are still lower than in 2021, when interest rates were at rock-bottom levels.

Although the country’s credit-card balances reached their highest nominal level on record in the final quarter of last year, they are—at about 6% of personal disposable income—comfortably in line with the norm over the past decade and a half, and well below the 8% that was reached during the borrowing binge of the early 2000s.

The country’s numerous small banks report delinquency rates that are more than twice as high as those in the country’s 100 biggest institutions. In the face of stiff competition, small banks have chased customers with lower credit scores since before the covid-19 pandemic. As a consequence, they report higher charge-offs, via which unpaid customer debts are written off as a loss. As Brian Riley of Javelin Strategy & Research, a consultancy, notes, unlike larger institutions, smaller banks lack the resources to closely monitor credit scores, or to chase debtors and quickly resolve delinquencies.

Fitch, a credit-rating firm, expects delinquencies to stop rising this year. That will be a relief for banks under pressure. But for as long as interest rates stay high, troubled borrowers face a much grimmer situation. For them, any relief looks painfully distant.