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"They are taking out what is effectively a loan, but they don't see it as one."

What *do* they see it as, then? Manna from Heaven??

If you're too stingy with loans, you're being elitist.

If you democratize loans, you're trapping people in a debt trap. 

This is total nonsense. Everyone claims to be an expert because Google, social networks, etc. How about using some of that expertise to understand the true nature of BNPL and decide whether to take a BNPL or not - and jolly well take responsibility for that decision?

Customer's account balance drops to zero. If she tries to pay her energy bill, the payment will be declined, she will lose the connection and will need to incur hefty reconnection charges. Instead of that, her bank tops up her account aka provides Overdraft, and levies a fee aka Overdraft Protection Fee. Nobody is forcing her to use the Overdraft Protection facility. If she really has such great control over her finances, she shouldn't need overdraft in the first place and wouldn't incur Overdraft Protection Fees in the second place. Like Stanley Bing, the late Fortune magazine columnist, I've never understood the angst against Overdraft Protection Fees. To me, it sounds like fulfilment of the raison d'être of a product in a capitalism. 

So what if banks want to "make literally billions in incremental profit"? The last I checked, USA was a capitalism driven by profit motive and people were expected to take responsibility for their actions.

I put a charge on my credit card on 1 September. It's included in the latest credit card statement I received today, which carries a due date of 20 September. I must correct the free credit period of 21 days in my above comment to 19 days. With BNPL, I'd have received free credit for 60 days.

If I were the beancounter types and / or savvy enough to play the call money market, I'd have chosen BNPL over Credit Card.

Now someone may point out that I'd get rewards on my credit card but not on BNPL. I'd agree. But it's not possible to estimate the value of the credit card reward points at the point of deciding whether to use Credit Card or BNPL: While the credit card reward point Earn Ratio is fixed (1 point / INR 100 Spend), the Burn Ratio has varied wildly in the past (from 1000 points to 2500 points for the same gift voucher worth INR 500). Whereas, with BNPL, it is possible to quantify the value of the extra 40 days of free credit upfront. 

The way all my credit cards work, while credit period can be as high as 56 days, it can also be as low as 21 days depending on the date on which the purchase was made. Whereas, in the case of BNPL, free credit period is uniformly 60 days regardless of the date of purchase. 

Personally, I've used credit cards for 30+ years and have never paid a penny in late fees or interest charges and have earned truckloads of rewards, so I'm not gonna use Klarna.

But there are people who want to buy a $2500 product today with a capacity to repay only $1000 out of that by the end of the month. With credit card, they will incur interest on $1500. On Klarna, they will incur no interest by repaying the entire $2500 in 3 months.

tl;dr: Klarna / BNPL is free credit. There's no shortage of market for anything free in this world. Ergo there are tons of people who will use BNPL. This is re. advanced markets.

(In emerging markets, credit card is extremely underpenetrated, aspiration to live beyond one's means is overpenetrated. BNPL is a compelling solution for a longstanding problem. I expect a 10X higher market size for BNPL compared to credit card out there. When Will Fintechs Sell What Consumers Want To Buy?).

As far as I can see, the only constraints to the growth of BNPL are regulation and the ability to absorb losses due to potentially higher loan delinquency rates.

BNPL is not the first - or last - time when a shiny new toy comes into the market and gains traction;  finsurgents exhort banks to jump into it or become extinct; banks ignore them and continue to execute on their time-tested FI Innovation Playbook; and always go laughing all the way to the - ahem - bank. 

BNPL Ain't Killing Banks. It's Making Them Rich

I know that's the party line but at least half a dozen traditional banks in India do offer instant loans at the POS. While their systems are newer than those in the West, they're still old enough to be called legacy. And regulations in India are arguably more onerous than in the West.

Also, going by my experience with an ex-employer who used to sell paperless, zero-touch digital lending solutions to US UK banks 15+ years ago, I find it hard to believe that banks in the West don't already use such solutions. 

IMO banks in the West face very different challenges from the ones presumed by fintechs. 

I agree that lending is a complicated line of business but, in the day and age of BNPL loan approved at the point of sale on the fly, I'd tend to think that the task of approving and disbursing a single loan should be fairly simple.

Transparent Mask: An idea whose time came long ago. Wonder when the product came. I haven't seen one yet.

The easiest way for banks to jump into the BNPL bandwagon would be to sign up with VISA to offer a plain vanilla credit card but with a twist - change the default repayment terms to 3 installments. 

While the issuer of such a credit card featured in this article is a nonbank fintech, I'm guessing VISA will be happy to offer the same product to banks as well.