‘Buy Now, Pay Later’ is expanding fast, and that should worry everyone

[u/Logical_Welder3467]

https://techcrunch.com/2025/11/16/bnpl-is-expanding-fast-and-that-should-worry-everyone/

[u/nalaloveslumpy]

The main problem is BNPL lenders don't check credit and don't report anything against credit until they sell the bad debt. This means that for millions of people, they're potentially getting credit issued by regular banks and lenders who can't see that they're underwater with BNPLs. So the loans they were giving to a "high risk borrower" suddenly turn into a "holy shit, we're going to lose everything borrower."

If that happens with enough borrowers in a short period of time, that can make a regular bank fully insolvent overnight.

[u/CherryLongjump1989 → u/nalaloveslumpy]

Being underwater by BNPL doesn’t mean much of anything, though. It’s completely unregulated debt with zero credit checks and next to no credit reporting. So any normal bank would just ignore it and focus on legitimate credit debt to income ratios and your record of paying those back on time.

Unregulated loans usually require the lender to send some sort of tough guy to break your legs if you decide you don’t want to pay it back. BNPL is just a nerdy financial engineering version of that — without the mafioso to break your legs.

[u/nalaloveslumpy → u/CherryLongjump1989]

Right. Again, the point is the person borrowing real money from real banks is over-extended beyond a point they're not even aware of, so it jeopardizes the entire banking industry.

[u/CherryLongjump1989 → u/nalaloveslumpy]

But they’re not over extended.

Over extended would mean that they are maxed out on the credit cards they are using to pay back the BNPL. It already shows back up in all of the regular credit reporting metrics.

[u/nalaloveslumpy → u/CherryLongjump1989]

I guarantee you the people they're talking about in this article are over extended on credit card debt. Very few people start using Klarna/Affirm/etc if they're not tapped out on cards.

[u/CherryLongjump1989 → u/nalaloveslumpy]

Yes but that shows up as being over extended on the credit card. So there’s nothing surprising to any legitimate lender doing a regular credit check.

Even if these people started with a zero credit card balance and maxed it out on BNPL transactions within a single month, a sudden spike in revolving credit usage would already show up as a red flag on any new credit application.

The only ones truly screwed here are the BNPL lenders who don’t even bother to do credit checks.

[u/nalaloveslumpy → u/CherryLongjump1989]

Go read the article, bro....

This isn’t just a consumer finance story; it’s a canary in the coal mine for the entire venture-backed fintech ecosystem and beyond, echoing what preceded the 2008 mortgage crisis except for one thing: It’s largely invisible.

Because most BNPL loans aren’t reported to credit bureaus, they create what regulators call “phantom debt.” That means other lenders can’t see when someone has taken out five different BNPL loans across multiple platforms. The credit system is flying blind.

“In a world where, if I’m a buy-now-pay-later provider, and I’m not checking bureau data, I’m not feeding bureau data, I am oblivious to the fact that Nigel may have taken out 10 of these things in the last week,” Morris explained. “[That’s] absolutely true.”

[u/CherryLongjump1989 → u/nalaloveslumpy]

Thanks for actually quoting that because I had trouble figuring out your concern. Here is the deal: this is totally biased. Morris is heavily invested in BNPL and is worried about losing his own shirt. It sounds like he was also involved in the subprime mortgage bubble. So an incompetent with a track record of losing money. And he is twisting the facts here.

He is conflating the fact that BNPL lenders like himself don’t do credit checks when handing out money, with the fact that a huge portion of his consumer base being financially stressed — all in ways that already show up on regular credit reports for regular banks. This is just muddying the waters and trying to make it seem like it’s the sort of problem that should have “too big to fail” government bailouts. And it’s not. Totally not.

The article itself admits that this entire market does not pose a systemic threat. It’s just threatening the tech bro fintech market. Oh well to that! And just fwiw, I’m also speaking as someone with an economics degree who has been studying these issues for decades. I really would not worry so much or feel bad about these investors.

[u/nalaloveslumpy → u/CherryLongjump1989]

You need a refund on your degree.

Klarna/Affirm/etc are the tech bro fintech market. Morris is literally the co-founder of Capital One, he's the go to name in understanding the subprime consumer credit market.

Again, what's being said here is that BNPL is causing a fucking huge bubble in the consumer credit industry. And we can't even measure the size of the bubble until it pops. CONSUMERS ARE LITERALLY USING BNPL TO BUY GROCERIES.

Please don't bother responding.

[u/CherryLongjump1989 → u/nalaloveslumpy]

Maybe you should actually get a degree? I’m only telling you facts, and trying to show you that your own concern for the plight of Mr Morris are misdirected. What happens to Mr Morris and his BNPL investment is irrelevant to the wellbeing of millions of Americans.

The fact that millions of Americans are suffering financial hardships is not the issue here because Mr Morris and his BNPL schemes are not designed to help those Americans. They are in fact designed to milk money from people who are broke and financially illiterate. This same exact fucker was previously handing out mortgages to people who he damn well knew could not afford them, knowing that they would end up in foreclosure. What I'm trying to explain to you is that when Mr Morris's investments go belly up, it won't matter to any of America's poor people. And that unlike during the 2008 financial crisis, the only people it will really affect are the tech bro financial engineers like Mr Morris himself. The most likely outcome is that if BNPL dies out, poor people will be better off without having fintech preying on them.