How are "buy now, pay later" apps different than a credit card?

It has made news today that Afterpay was just bough for $29 billion.

I can’t figure out how this business model works (never even heard of such a thing until now).

Sounds like what a credit card does but it’s not a credit card.

For one thing, from the link, “Afterpay lets customers pay in four interest-free installments and pay a fee if they miss an automated payment.” Most credit cards aren’t interest free.

But yes, it’s an installment plan for purchases, which lots of retailers offer.

I’d never heard of this before, but from the article, it appears that the difference is that the loan is interest-free to the consumer (as long as the installment payments are made on time) the cost being borne by the merchant who theoretically benefits from higher sales volume. Whereas credit cards charge the consumer an extortionate interest rate if the monthly balance isn’t paid in full.

This looks like a commoditization of the “buy now pay later” interest-free plans traditionally offered by some merchants of big-ticket items and funded in-house. The snag was always that unless you adhered to the payment terms exactly, you’d get hit with significant interest charges.

ETA: Ninja’d by @Dewey_Finn

I have no idea why the company is worth spending $29 billion to buy. Surely you could build something similar for a lot less in some time?

(Lots of these technology acquisitions astound me. I think Facebook bought Instagram for about a billion, which makes sense, but they bought WhatsApp for $18 billion or so, which makes less sense. And they three two billion or so at Oculus for their VR headset business.)

It’s less about the company or their service and more about their 7 million established customers.

So they paid about $4,000 per existing customer.

So how does Afterpay earn revenue that makes it worth $29 billion?

Do they screw customers hard if they miss a payment?

Possibly they have contacts in the olive oil industry who will enforce their contracts? Really, though, it’s an all-stock deal, so it’s kind of, sort of funny money.

(I read somewhere that if a company does an acquisition for cash, it’s because they think their stock is undervalued but if they buy a company with stock, they think it’s overvalued.)

Data about the shopping habits of customers is very valuable.

I get that data is valuable but are there no limits?

There are so many companies out there selling personal data who is buying it all?

I mean, at some point I will stop buying data. I can only use so much and I can only afford so much.

The 100th electronic retailer trying to sell me their database just isn’t attractive anymore.

Is this one of those things you still have to qualify for? I’ve only seen this on eBay I think it was, and I never used it because I had the money to it all upfront, and I find it easier to budget if the money is just gone, rather than having to anticipate it disappearing.

Ok, but I don’t think you control the market under discussion here. So you getting tired of something is rather irrelevant.


Did I say something to piss you off?

Why does that make less sense? Outside the US, WhatsApp is basically the chat/text standard app. Government agencies use it to send information.

Why exactly do you think Google is worth so much money? They are first and foremost an ad company. Companies pay Google to provide targeted ads to folks and since Google knows so much about people it can adequately target those ads properly. Facebook is worth a lot of money for the same reason.

I get there is huge value there.

But money is finite.

Any company can only afford to buy so much data and there seem to he a helluva lot of companies selling it.

If I buy from Google and Amazon and Facebook do I want to buy from Afterpay too?

Surely there are limits.

Apparently not. More data allows one to further fine tune their targeted ad buys/sales.

Well, when it comes to Google and Facebook you aren’t actually buying data. You are providing an ad to those companies so they can use their targeted data to determine the best possible people to show the ad to.

Money is finite.

Eventually, any company will no longer have money to buy data.

Thankfully no one is actually buying data. They are placing ads with the people who have all the data.

No You only have to make minimum payments and pay the balance by the due date. Of course they are hoping enough people don’t pay by then and extend the payments (with accrued interest) for several more months.These are just standard 6 month or 12 month no interest accounts. They have been in the US forever. Don’t other countries have them?