AILSA CHANG, HOST:
My next guest needs a new couch. Her name is Brittany Luse, and she is the host of NPR's It's Been A Minute, which investigates the overlooked parts of culture. Hey, Brittany.
BRITTANY LUSE, BYLINE: Hey, Ailsa. Great to be back.
CHANG: Great to have you back. OK, so today, what has been specifically overlooked is the fact that you need a new couch, right? That is where we are going to start today (laughter). So I hear that, like, every time you find something you like online and you're about to check out, you stop yourself. Because I get it - couches are really expensive.
LUSE: So expensive.
CHANG: It's a lot of money for a single online purchase, right?
LUSE: Yeah. I mean, whether it's a couch or a new summer swimsuit, I keep seeing the option right under credit card and Apple Pay to buy now, pay later. Or, in other words, break up the whole cost of my purchase...
CHANG: Yeah.
LUSE: ...Into installments and pay it off over time.
CHANG: Which is really tempting.
LUSE: Sure.
CHANG: Like, why pay all of it off now? So what did you do? Did you buy it and pay it off later?
LUSE: Oh, no. No, no, no, no, no, no, no.
CHANG: (Laughter).
LUSE: I got a little sidetracked because all of this led me to investigate how these buy now, pay later options became so ubiquitous online. It's so widespread that one of these BNPL companies partnered with DoorDash so that you can get snacks delivered to your house...
CHANG: Oh.
LUSE: ...And pay for them later.
CHANG: Don't even tempt me with snacks. All I want are snacks. OK.
LUSE: (Laughter).
CHANG: I mean, I have heard of these companies like Klarna or Affirm or Afterpay. Where did these companies even come from, and why are they so widespread now?
LUSE: OK, so that's the million-dollar question. So it's really a result of two things. One, there was a law passed a while ago that limits how credit card companies can market to college kids - people 18 to 25. And two, for a long time, the tech industry has been looking for ways to disrupt the credit score industry. So these buy now, pay later companies can market to young customers in ways that traditional credit cards can't.
CHANG: Oh.
LUSE: And the tech industry has been willing to integrate them into online platforms as a way to kind of remake the financial industry.
CHANG: Oh, wait. So these companies, they're kind of like loopholes in the system, and tech companies were already primed to back them? Is that what's going on?
LUSE: Yeah, and how that works in actuality is that these companies are able to bypass these credit restrictions with micro loans and tailor it to consumers' interests. NPR's Andee Tagle looked into BNPL for a Life Kit episode, and here's how she described it.
(SOUNDBITE OF ARCHIVED NPR BROADCAST)
ANDEE TAGLE: That technology is super-specific to your data. They can also use that specific technology to market the things that you like to buy. Those impulse purchases are specific to you - that bathing suit that you've gone to 26 times in the past however many months. And they have a credit limit based on what they know you can spend or what you might be willing to spend.
CHANG: Dang.
LUSE: Yeah. Andee compared it to the grocery store - you know, that area right in front of the cashier where there are snacks and gum and soda for you to just...
CHANG: Oh, yeah.
LUSE: You love snacks. Exactly.
CHANG: (Laughter).
LUSE: So they're there for you to just buy last minute. If you have an app that offers buy now, pay later loans, the app curates that little section just for you. So Ailsa, any ideas what might be in your personalized section?
CHANG: Oh, yeah. I mean, the impulse buy section gets me every time when I am standing in line at Sephora and I'm looking at all these, like, travel-size makeup things and skin moisturizers.
LUSE: (Laughter) Yes.
CHANG: But - OK, this sounds like to me a way for the tech industry to just bypass other financial restrictions in order to make consumers think differently about loans or lending. What do you think? Is that what's going on?
LUSE: Yes. I talked to author Malcolm Harris about this. He's been documenting how the tech industry has done this in other industries, and he compared it to Uber. I don't know if you know this, but originally Uber was going to be called Uber Cab.
MALCOLM HARRIS: Their strategy was to chop the name Cab off, and then they were an internet service for riders or whatever. And so that's how they could dodge all of the cab industry regulations, which was the key to their success 'cause they'd been subject to all the industry regulations, they never could have got off the ground.
CHANG: OK, then Brittany, how do you think Uber's story foreshadows what could happen down the road with buy now, pay later companies?
LUSE: OK, another million-dollar question (laughter), Ailsa. Well, in the case of Uber, bypassing those restrictions was essential to their astronomic rise, and by the time regulation caught up, Uber was already deeply ingrained in our culture. Harris suggested that the same would be true for buy now, pay later companies. Even right now, traditional financial institutions are looking for ways to bring them into the current credit system. But by the time the system incorporates these loopholes, young people could already be so used to buy now, pay later services that it reshapes how the next generation thinks about what they borrow money for.
CHANG: Wow. OK, well, I buy what you are saying to me, Brittany, and I just hope I don't pay for it later.
(LAUGHTER)
CHANG: Did you see what I did there?
LUSE: Ah.
CHANG: Thank you so much for hanging out with us again (laughter).
LUSE: Oh, thanks, Ailsa. Let's do it again next month.
CHANG: Absolutely. That is Brittany Luse, host of NPRs It's Been A Minute. Each month, she brings us a look into some overlooked part of culture.
(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.
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