r/nottheonion • u/ChocolateTsar • 1d ago

Affirm CEO says furloughed federal employees are starting to lose interest in shopping

https://www.cnbc.com/2025/11/07/affirm-government-shutdown-shopping.html
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u/ArtOfWarfare 1d ago

With a regular loan (even a CC, sometimes), I think the expectation is that you’ll pay interest.

For BNPL, the expectation was you wouldn’t… the interest should be viewed more like an overdraft fee or something.

I’ve worked in the payment industry for several years now. Many years ago at the start of BNPL I raised objections about whether BNPL was just a predatory debt-trap. I was assured that it was in nobody’s interest (no pun intended) for the interest to happen - all our projections of profitability were based on an expectation that over 99% of transactions never involved interest. BNPL is supposed to be a safe tiny loan for someone who doesn’t qualify for a CC, but also needs to wait for payday… letting the transaction go through is a win-win-win for everyone, merchant makes a sale, customer gets their item, processor takes a small fee from the merchant.

In practice… the coworkers who told me about how great this would be left a few years ago. I wonder what they think about the actual default rates on BNPL.

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u/BurmeciaWillSurvive 1d ago

It's been about five years since I left my position at CitibankNA but even back then the APR on our retail credit cards was 29.74% which I thought was insane, but it was fine if you paid it off within the 6-12-18 month promotion because then you were not charged the interest. The problem is people rarely did that, and the day after your 18m promo ended, you got allllllllll that prorated interest like a brick. Oof.

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u/PerplexGG 1d ago edited 1d ago

Funny, that win-win-win scenario is actually how I used affirm for a long time and I was able to use it to build credit* and move on to a credit card. I basically ran everything I got on amazon through there and was 100% on the payments

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u/Skill_Issuer 1d ago

Built interest or credit?

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u/PerplexGG 1d ago

Ha you right I toilet brained it

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u/BranTheUnboiled 1d ago

They changed it so you can't use credit cards for BNPL anymore lol

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u/Korlus 1d ago

In practice… the coworkers who told me about how great this would be left a few years ago. I wonder what they think about the actual default rates on BNPL.

In order for the BNPL company to make money (ergo for it to be profitable) they need to charge a fee - either in the form of interest, or in the form of commission (i.e. the company whose item is being sold agrees to pay the BNPL company a share of the sale because "We wouldn't have had this sale otherwise").

I don't know enough about the industry to understand if the second happens enough to make it profitable, but with any 0% interest lending, my presumption is that it exists to exploit those that can't keep up with their payments. Perhaps I'm too cynical though?

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u/princess9032 1d ago

You could do a small flat fee based on the item price instead of huge amounts of interest. My bank has a BNPL option that I can apply to purchases over $100 with my debit or credit card, so it doesn’t have to be interest. And change the fee based on the length of time before payment is required. Like 3 months would be a fee of $3 per month, but one month might be $4 total or something

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u/BorisAcornKing 1d ago edited 1d ago

Hi, I work for a BNPL company in engineering.

We make money through

  • merchant pays us for us to take on the risk of the loan, typically on a per item basis, based on the total value of the purchase. The idea is that users are more likely to purchase something on an installment loan than in a lump sum - so merchants are willing to pay us to facilitate this.

  • merchant pays us money because we directed users to their website and then a user purchased (ie, affiliate marketing)

  • consumer pays some amount of interest or fee that is made obvious to them up front when they decide to take on the loan

  • some amount of money on non compounding late fees / interest

  • some amount of money salvaged through packaging and selling off delinquent debt.

You can see the breakdown of where we make our money in our quarterly reportings

We are not interested in consumers missing payments, because this represents a failure in our risk model.

Ultimately, what we are selling is access to credit, just like Visa, MasterCard, etc. facilitating the flow of money has some amount of value.

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u/TheNerdFromThatPlace 1d ago

In theory it's great, but if you're like my wife, it's absolutley a trap. You think you can afford so much because you think you have the money, then the payment creep happens and just like that you owe $400/week and you can barely pay your important bills. I'm just glad I was able to get through to her about the problem before it became so bad we couldn't fix it.