in the coming months. At a café, Levchin paid
for a $22 lunch by splitting the payments into
four biweekly payments of $5.50. The company
is testing a debit card that will allow customers
to decide whether to pay any purchase in total or
spread it over time.
The cost of doing pay-over-time can vary with
Affirm and other buy now, pay later providers.
A six-to-eight-week purchase may carry no
interest at all like the $22 lunch. In some cases, the
merchant has decided to pay the interest for the
customer. But other consumers could pay as much
as 30% annual interest on these large purchases
with Affirm.
Afterpay does not charge interest on its purchases,
but does charge borrowers a late fee if they miss
a payment, up to 25% of the loan’s value. Affirm
does not charge late fees on any purchases, but
typically is willing to lend larger amounts and
charge interest on longer-term loans.
The interest in buy now, pay later does not seem
to be slowing.
A September study written by consulting firm
Accenture, but commissioned by AfterPay,
estimates that roughly 6% of all dollars spent
online will be on buy now, pay later programs by
year end. That figure is forecast to be 13% of all
spending by 2025. That figure was basically zero
a few years ago. Two major retailers — Wal-Mart
and Target — have partnered with buy now, pay
later companies like Affirm. Wal-Mart got rid of its
layaway program in favor of buy now, pay later..
Credit card companies, seeing the potential
impact of buy now, pay later on their business
model, have tried to adapt. American Express,
JPMorgan Chase and Citigroup all now offer