Buy Now, Pay Later Eats Credit Card Profits

Discover Financial reported last week that credit-card loans were down 9% for the year ending Jan. 31, 2021, reports Crain’s Chicago Business. Meanwhile, Affirm, a leader in installment lending, announced a debit card with BNPL features to make the increasingly popular financing method easier to use at retail point-of-sale, according to PaymentsSource.

“The trend eats away directly at Discover’s business model,” Crain’s reports. “Consumers who before would have borrowed on their cards to finance purchases now have an option that’s often cheaper and easier to understand.”

Credit debt last year fell for the first time in years, by more than 6%, reports Nerd Wallet. It’s been almost a mantra this week that pent-up demand will be unleashed as the pandemic subsides, leading to increased consumer spending.

Whether that’s good for the credit industry remains to be seen. In the short run, at least, we’re more likely to see money sloshing around from a new government stimulus bill, putting the loans on the federal balance sheet rather than consumer credit statements.

Collin Canright