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- [00:01]
A
Wonder. I'm david brown and this is business wars. Buy Now, Pay later services have reshaped the way we purchase things. They've turned big ticket items into little treats. Instead of throwing that new jacket on a credit card, you can make four small interest free payments. And that's not debt. That's a budgeting hack. Yeah, right. These payments may be minor. They may seem small at first, but the debt can really start to Snowball. More than 60% of buy now Pay later customers have multiple loans out at once. Luxury purchases are still the most common application, but a growing number of people are also using these apps to fund necessities like groceries and medical bills as prices for everyday goods continue to climb. And now the credit scoring company FICO has announced that it will factor Buy Now Pay later loans into its models. That could have big consequences for regular users of those apps who might have considered them safer than credit cards. Financial technology or fintech became popular over the past decade and a half because it made banking more accessible and convenient. But have we started putting too much trust into apps like Chime, Cash App, and Klarna? Or have these services come full circle, proving to be no better or safer than the traditional banks they sought to replace? Adam Clark Estes is a senior technology correspondent for Vox and he's written about fintech and tried out a lot of services for himself. He's sharing what he learned, like which ones to trust and when and how these apps affect our growing affordability crisis. Later, Annie Joy Williams of the Atlantic talks with us about a pattern she noticed in the marketing of these Buy Now Pay later apps. Some campaigns contained a whole lot of pink, plus cute, colorful murals and collaborations with Y2K Divas. It looked to her like the apps were targeting young women, so she started to dig. Annie Joy explains what she found in her reporting and how she was also pulled into the Buy Now, Pay later cycle as a young college student. We'll look at the future of these services in a world where more and more young people claim that money is fake, despite the very real consequences of debt. All that's coming up. Adam Clark Estes, welcome to Business Wars.
- [03:00]
B
Hey, thanks for having me.
- [03:01]
A
Hey, what got you interested in covering fintech in the first place?
- [03:04]
B
You know, it's a great question because FinTech I don't think is the most exciting sector in technology for a lot of people, but for me, of all things, I think that it was probably the Great Recession. It was when I was getting started as a journalist and there were a lot of stories about Sort of what, what caused the financial crisis and the role that big banks were playing in our lives. And I just kind of got curious if like, you know, tech had an answer to this. I was covering technology at the time and I started stumbling across these little startups that were doing things that were adjacent to banking, but in a very user friendly way.
- [03:41]
A
Interesting. Now I've heard you describe yourself as a collector of debit cards. You gotta explain what that' this was years ago.
- [03:49]
B
I, I've since whittled down my collection but in the early teens there were a lot of companies starting up. The first one that I signed up for was called Simple. It was a bank that has since been acquired and emerged into a bigger bank. You've probably heard of Chime.
- [04:05]
A
Yeah, sure.
- [04:05]
B
And it was around this time that fintech companies like Chime were partnering up with chartered banks. Chime is not a bank, it's partnered with a chartered bank, which is a more regulated entity and offering banking services. So you could kind of like sign up for an online account and set up a bank account really easily and they would send you a debit card.
- [04:26]
A
So that's what you did. You literally collect debit cards.
- [04:29]
B
I did it for like 10 different banks like this just because I was curious about like what, what each one was doing different and some of this was for work and I was writing about it at the time, but before I knew it I had like a Venmo debit card and I had a, a cash app debit card. And a lot of people have these now. But at the time it was very novel.
- [04:46]
A
What led to the rise of all of this?
- [04:49]
B
I think that it was a combination of demand and just the technology that made it more possible. I don't think any of these companies would be around if it weren't for smartphones and the apps that we put on them. A company called Digit set up an app that you could connect to your business bank account that would take a small amount from every transaction and put it in a savings account. But there was also like a, a ton of demand there because big banks, your Banks of America, your, your Chase banks out there, they weren't doing things like this. And their, their online banking portals were just sort of horrible to use. So I think that early fintech companies realized that they could create these very consumer friendly products and people would come and use them and have a great experience.
- [05:38]
A
What about Buy Now, Pay Later? Is that distinct from some of these other fintech services? Does it have a distinctive sort of fingerprint?
- [05:47]
B
If we're talking about the companies involved in sort of the genesis of Buy Now, Pay Later. I would say that it's distinct, but I think that I'd still describe those companies as fintech companies and I would still say that they are fulfilling the same kinds of demands that led people to set up bank accounts with, with Chime. You know, one of Chime's early sales pitches was that it would help you get paid a few before you actually got your paycheck.
- [06:12]
A
See, see that? That's interesting that you would say that because I think of Buy Now, Pay later almost as the modern day style of layaway. Whereas used to be, if, you know, back in the day layaway, you couldn't touch your goodie until you had actually finished paying for it. But at least you knew it was sitting in the warehouse back there with your name on it. Buy Now, Pay later sort of satisfied that craving to get it now, you know, that credit cards give you. But at the same time you didn't have to apply for a credit card and you could do right there while you were sort of late night shopping.
- [06:44]
B
Oh, it's absolutely like a, like a modern reverse layaway. And I think you do a good job describing it as a way to kind of skirt around needing to apply for anything or qualify for anything, but being able to get that thing you want, whether it's a new pair of shoes or a new TV right away and kind of pay for it later. But I do compare it to those other fintech companies in this sort of rise of FinTech 10, 15 years ago because it's taking advantage of technology and of that consumer demand for people to have better financial products. And it's giving them something that, you know, there's a real upside for them. And there's downsides too. I'm sure we'll get to that.
- [07:23]
A
Have you ever tried one of these Buy Now, Pay later offers yourself?
- [07:27]
B
I've tried Buy Now, Pay Later a couple times. I'm actually paying off a Buy Now, Pay later loan right now. I thought a lot about it and I looked at all my options and it turns out the Buy Now, Pay later option was the best. I bought a new mattress. They're expensive.
- [07:41]
A
Yeah.
- [07:41]
B
And every single company offers the ability to pay with afterpay or affirm or whatever.
- [07:48]
A
Yeah.
- [07:48]
B
And it just made more sense to me to have a what for me was a zero interest loan to pay off this big purchase over time instead of, you know, pulling out a savings or putting it on a credit card. It was a good proposition. But it could have been a much worse proposition if I were doing this often or if I wasn't doing my research and didn't know the consequences if I didn't pay it back every month.
- [08:12]
A
See, now you're touching on something that has always gotten me wondering about how they are profitable or how they avoid the enormous risk that comes along with what I would imagine to be the back end of Buy now, pay Later. Because it seems like, like there's this one company that I shop at almost consistently and it has a buy now, pay later opt, and it seems to be offered to just about everyone. Lord knows they haven't checked my credit rating. So I go ahead and check out use the buy now, pay later option. And I'm thinking, okay, but if I were to default on this, who's holding the bag? Is it Buy now, pay later? Is it some other bank? Is it the retailer that I'm purchasing from? Because it seems to me that wherever the buck stops is going to be holding a lot of bad debt. That would seem to me to be pretty big. How does this even work from an economic standpoint?
- [09:00]
B
I think it's a great question. Who is holding the bag? It could be that the, the whole economy is because the companies like Affirm and Afterpay, they're actually bundling up this debt and selling it off as securities and, and trading it. And if that sounds kind of familiar, it's because that's sort of. Well, that's exactly how the housing crisis started and ended. It was securities full of risky debt and people didn't really know what was in them but were buying and selling them. And if you've seen the big short or if you live through life in the United States in the late aughts, you know what happened next. It's a tough comparison to say that the housing market and the buy now, pay later market are the same thing, but the same kinds of things are going on.
- [09:39]
A
Yeah, I mean, I would imagine much bigger debt and stakes being considerably higher when it comes to mortgages, but still, there's a lot of consumer debt and our economy is driven by the action of consumers, as we all know. But I'm now curious if that's happening, whether regulators or lawmakers are starting to turn their attention at what's going on here with the trading of effectively debt.
- [10:01]
B
Securities regulators were. During the Biden administration, the cfpb, the Consumer Financial Protection Bureau, actually passed some rules that would treat buy now, pay later loans more like credit cards. And that seemed to be a step in the right direction. Because, you know, there are some protections you have as a consumer when you use a credit card, and there are reasons why you can't keep getting new credit cards if you're maxing out and not. Not paying off your old ones.
- [10:27]
A
Right.
- [10:28]
B
But those rules were paused when the second Trump administration took over last year.
- [10:34]
A
And so where did the buy now, pay laters stand? Is it back to business as usual prior to the whistle being blown by the Biden administration? Or where are we?
- [10:43]
B
I think, as far as I know, from a regulatory point of view, it is back to business as usual. But I do think that the movement like. Like FICO stepping in and starting to keep track of this debt is a step in the right direction. I don't think that everybody in the industry wants to be living in the wild west.
- [11:02]
A
Yeah. Well, let's talk about the consumers, though, because it seems to me that given the way that these buy now, pay later offers work, there's nobody really sort of holding up their hand and saying, well, there, you've already done three of these in the past three months. You got. You got to cool it. I'm not seeing any sort of guardrails, I suppose. I mean, isn't there a point where these apps really do start becoming too good to be true for consumers?
- [11:32]
B
I guess we have to define too good to be true, because I think that the real risk that people find themselves in is when they sign up for a buy now, pay later loan and they don't realize the fees and penalties that are attached to it. And it gets a lot worse if they're signing up for multiple ones. And this is what's called stacking. So you might go to a firm and sign up for a zero interest buy now, pay later loan and buy a mattress. That's. That's great. And that kind of pulls you in with, like, a too good to be true offer.
- [12:04]
A
But then, you know what happens next? Your laptop crashes. And so you're going to need a new laptop, right?
- [12:10]
B
Yeah. And you think, oh, I'll do that buy now, pay later thing. That was. That was great. And you can. Except this time, Affirm wants to charge you a 10% interest rate. And those interest rates can keep going up as you take on more and more of these loans and kind of become a riskier proposition for the company. And they can get pretty high. Most of these interest rates top out at, I think, 35% or so.
- [12:33]
A
Mm.
- [12:35]
B
Which you're like, you're not getting into loan shark territory. But it's higher than a credit card probably would be.
- [12:39]
A
And at the same time, it's, it seems to me it's really easy to lose track if your credit card's getting pinged and you're not really in communication with Buy Now, Pay Later. Oh, you might get an email, but you don't have that regular contact that would remind you, hey, you've already got a couple of these going, you know, and for instance, in the past when I've used this, I wasn't sure exactly where I was with my Buy Now, Pay Later. I knew that my checking account was getting pinged every month or so, but am I done with that? Have I paid that off? I'm not sure. You know, and a lot of folks aren't going to go to the trouble of digging through and trying to trace it all the way back. You know what I mean?
- [13:18]
B
Absolutely. And there's nobody keeping track of all these. The Buy Now, Pay later space is largely unregulated and nobody really knows how much debt is out there. And while you can go and find out what all your credit card debt is, there tools and regulations that make that possible. It doesn't necessarily exist on the buy now, pay later side of things.
- [13:39]
A
Hey, it's time for a break. My guest is Adam Clark Estes. He's senior technology correspondent at Vox. And when we come back, we're going to look at how fintech shows up in, in an affordability crisis. Stay with us. Welcome back to Business Wars. My guest is Adam Clark Estes. He is senior technology correspondent for Vox and as it turns out, a fintech consumer himself. Adam, what about the banking apps that you've tried? You know, the ones with all the debit cards, when do those start to become more dangerous?
- [14:19]
B
You know, danger is such a fun word to use to describe anything, and you wouldn't think to use it to describe a bank account, typically, because, you know, we've been sort of socialized to believe that banks are safe. They're the buildings with the big vaults and they keep our money safe. And when we put our money there, we have a sense of security. There's a whole charter system set up that keeps banks in line, make sure they're following the rules and won't lose your money. There have been plenty of panics in the past that have led to these regulations. But in the world of FinTech in the 21st century, we're kind of in a new wild west where it's a lot easier to offer banking services. And the way the rules are set up, you don't actually need to be a chartered bank to offer those services.
- [15:05]
A
When you say chartered bank, these are more like the classic banks that we think of that have brick and mortar operations. Perhaps they have ATM access, federal deposit insurance protection, that sort of thing.
- [15:17]
B
Yes. So if you think about a chartered bank, this is a bank that will have FDIC insurance. It will have gone through a lengthy process to get that designation of charter bank, both on the federal level and the state level. And because of that, its customers have some guarantees that their money is safe in this bank's vault. Take a. A fintech company like Chime Chime is not a chartered bank, but it has partnered with a chartered bank in order to provide its financial services. And because it has that partnership, it can say that your money is FDIC insured, but it's not insured by time. It's kind of complicated, but I think that's kind of the point.
- [15:55]
A
Tell us about one of these worst case scenarios. What, what happened with this savings app called Yotta.
- [16:01]
B
So Yotta was one of the kinds of apps that I used to download just to try out. It was a, it was an app that sort of gamified savings and had like kind of giveaways where you could enter a lottery and earn money, but it was just an app and it had to partner with another company in order to, to move your money. The company is called Synapse and Synapse ultimately went bankrupt and people who had their money in savings accounts with Yotta no longer had access to their money.
- [16:30]
A
Holy cow. They were just frozen out of their accounts.
- [16:33]
B
Yeah, these are like, for some people it was their life savings and they were, they're could not get access to that money for, for months and months and months.
- [16:39]
A
Have you had any experience trying to get a hold of someone when things go wrong or has that ever popped up for you?
- [16:44]
B
My first fintech experience was with a bank called simple. And one of their sort of guiding principles was that it would strip down everything that your big bank messed up in its online banking portal and make everything super simple.
- [17:00]
A
Right.
- [17:01]
B
If you needed to talk to someone, there was just a phone number you would call and a person would pick up on the other line. And it was true and worked. The customer service was amazing. But as more and more companies like this popped up, customer service was, was something that fell by the wayside for a lot of them. And because there are no brick and mortar locations for a lot of these fintech companies, you can't just walk into the lobby. Like I can do it my local Chase Bank. You might be sending emails off to an inbox somewhere and not knowing what's going to happen to it or, or talking to a chatbot. But the lack of customer service can, can be a really tough thing when, say, you're frozen out of your savings, for instance.
- [17:39]
A
Yeah. I've heard others complain that poor customer service seems to be something of a hallmark of some of these services. Would you say, Adam, that you are part of these apps, typical user base, or who do you see as using these services the most when it comes to any app?
- [17:55]
B
I don't think that I'm normal. I'm a tech journalist and half the time I'm downloading an app to, to see what it does and how it's different and what's new about it. But a lot of these apps are appealing and a lot of these companies are successful. There's a huge population of unbanked people in the United States, and actually making it easier for people to get access to financial services is something that the fintech industry has allowed. And I think that's a great thing. But a lot of the people that are unbanked are also the people that, you know, might not have the same financial literacy to know how to stay away from fees or to get roped into offers that are too good to be true.
- [18:31]
A
I think for some people, when they hear a lack of financial education, we're often talking about people who may not have had just real world experience or much life experience. Maybe younger people, maybe college grads, maybe someone who hasn't had the chance to do much of their own money management. And I'm wondering if what's happening, what we're seeing with some of these services, points to this huge yawning gap that nobody is standing around ready to fill this gap in education, financial education.
- [19:03]
B
That's a great point. And, you know, I kind of got into the idea of fintech and learning about banking at a time when banking really let down the young people of America and actually people of all ages. So I sort of had to learn about a lot of the principles of personal finance for yourself, myself. Yeah. And for survival for. For a while.
- [19:23]
A
Right.
- [19:23]
B
So I think that some young people, Gen Z, might not have the same base level of knowledge that like my generation, millennials, has. And I think you could also say that some of these fintech companies, some of these Buy Now, Pay later companies, are taking advantage of that. If you look at the marketing for Buy Now, Pay later, it is very clearly marketed to young people, to people who might not be able to afford a $200 purchase today, but could afford to part with $50.
- [19:49]
A
Do you think it's reached the level of almost predatory or not quite yet? See, what I'm wondering is if young people haven't experienced, say, what you went through and what others went through. It seems like there's always a generational moment where it's like a wake up call. Look what's happened and how did this happen? How did I not see it coming? You know what I mean? And I wonder if in a way what's happening with Buy Now, Pay later is sort of a setup for that experience to hit this younger generation if there's not some sort of intervention.
- [20:22]
B
Of course, you know, when I wrote about Buy Now, Pay later, most recently, I did put the word dangerous in my headline because after doing the research and sort of finding out how fast the industry has grown and what's happening with the securitization of this debt and with how many companies and how much money is at stake, it did feel dangerous. It felt dangerous not just for individual consumers, but also for the economy. I don't want to call the companies predatory per se, but I think that something dangerous is going on and they appear to be leading it.
- [20:56]
A
Yeah, it almost seems like Buy Now, Pay later and some of the fintech advances, if we want to call it that, sort of herald back to the birth of even the credit card. And there seem to be a lot of parallels to me because when credit cards started being popularized, they were advertised on television, they were advertised everywhere. People having, you know, scads of plastic sitting around and sort of getting lured into carrying more and more plastic. Before debt was considered to be the kind of consumer problem that it would become, there was that learning curve. And you know, I think on the one hand, fintech apps and that sort of thing can make banking more accessible for those who otherwise couldn't get an account. But it does seem to be opening a door to something that will be awfully familiar to anyone who has read history. Especially as it sort of does seem, at least to me, to have parallels with, with credit cards. What about to you?
- [21:52]
B
Oh, I think it's a great comparison. And I, I even remember when credit card companies could just send you a card in the mail.
- [21:58]
A
Yeah, right.
- [21:59]
B
You fire it right up and start spending. That was the, that was the whole idea. In a fact, that's exactly what a Buy Now, Pay later loan is. And you're not getting it in the mail, you're getting it on the, the checkout page of your favorite online store.
- [22:14]
A
Dang, I had not thought about that. That is a perfect comparison. I'd forgotten about when credit cards were just being sent to people in the mail and it was like, sure, why not? They're offering it to me. Let's go. And you think about what's happening with affordability these days. Some people are using Buy Now, Pay later to pay for their groceries. What does that tell us about what's happening in the economy sort of writ large? Or is it fair to look at it from that perspective?
- [22:40]
B
Do you think it's absolutely fair to, to tie the boom in the Buy Now, Pay later industry with the affordability crisis Generally, the fact that people are using these products which are advertised to be, you know, sort of like, oh, treat yourself like, get the handbag you always wanted but. But can't afford right now. The fact that a lot of people are, are using these loans to, to buy groceries speaks to a much bigger problem. And I think also the ubiquity of the Buy Now Pay later products. It used to be just certain stores had it. They started out companies like afterpay and Affirm started out at like kind of luxury goods companies, right? But now you can use Buy Now, Pay later virtually anywhere and to pay for anything.
- [23:25]
A
Any advice for folks who are contemplating or using these apps or services? Is there a way to use it responsibly and safely?
- [23:33]
B
The basic advice that I would offer people when it comes to Buy Now, Pay Later, I think also applies to just sort of like tech in general. It's something I write about a lot at Vox, and it's this idea of being intentional about what you're doing. So much of the tech out there, especially apps and software, is designed to keep us using it. It's, you know, ChatGPT is designed to be sycophantic. It's designed to make you like it in order for you to keep using it. And the same is true of TikTok and your Instagram feedback. All this tech is designed to be used more and more and Buy Now Pay later is no different. It wants you to make a quick decision because it wants you to use that product. So what I would recommend to people is to slow down, to be intentional, to read the fine print, to know what you're getting into. I don't think that Buy Now Pay later has to be a bad thing. Like I've said, I've used it myself. I'm paying off a Buy Now Pay later loan right now. But before I made that purchase I did a lot of research and I looked at my other options to make that purchase, and it turns out Buy Now Pay later had the best offer. So that's the one I took. So I think slowing down and being intentional in a world that's constantly trying to make you move faster and consume more is just basic advice, but I think it can take you a long way.
- [24:50]
A
Adam Clark Estes is a senior technology correspondent for Vox, where he covers AI, FinTech, and Silicon Valley. You can check out his reporting at Vox. Adam, thanks so much for joining us on Business Wars. That's some solid advice and some terrific insight.
- [25:04]
B
Thank you. This is fun.
- [25:05]
C
Coming up, I think that's really dangerous because for so many years it was just a common trope that women are shopaholics and they can't control themselves when it comes to money. And that honestly probably kept us out of the game for money for many generations.
- [25:19]
A
How Buy Now Pay Later Apps Tried to Rebrand Debt as Cute Stay with us. Welcome back to business wars. Nearly 90 million Americans are using Buy Now Pay later services to fund their purchases. But there's one group that's been getting quite a bit of attention in the marketing campaigns. Ger Luck what Long Dog Stretch your payments with Klarna. This 2023 Klarna campaign stars Y2K icon Paris Hilton and Gen Z beauty influencer Bretman Rock. They're at an ice cream store in what looks like Barbie's dream world. For the past few years, these companies have specifically targeted young women, and that's because more than half of all Buy Now Pay later users are under 35 and women are 68% more likely to use these services than men. But critics caution there's a dangerous side effect of this snackable spending as folks plunge into meal sized debt. Annie Joy Williams is an assistant editor at the Atlantic, and she explored this phenomenon in a piece called the Rise of Cute Debt. Annie Joy, welcome to Business Wars.
- [26:43]
C
Thanks so much for having me.
- [26:45]
A
What inspired you to dig into this story?
- [26:47]
C
So I was actually on the subway a few months back on my commute home from work and I noticed an ad for a Buy Now Pay later service on partnership with afterpay. And it read, little payments are so much cuter. And my first thought was this ad wasn't made for a man. This ad was made for me. You know, a young woman trying to make it in a very expensive city drowning in debt. So it opened up a curiosity that I then dug into which really opened Pandora's box on this stuff.
- [27:18]
A
I can Only imagine. What did you find out? Did you. Were you onto something? Were your instincts correct?
- [27:25]
C
I think they were. I found so many targeted campaigns that were very specifically made for young women. So a few examples of that. Klarna did a pop up with Paris Hilton for the house of Y2K. They also did a pop up with Shein, which is this big women's clothing, fast fashion brand. It was a bubblegum pink party bus where you could get manicures and makeovers that read on the side. And pink. We dress so very feminine in nature, you know. But I even saw a few murals. One read, after pay is like eating the whole carton and spreading the calories out over six weeks. And, you know, oh, gosh, men may not be counting calories with dessert in the same way that women usually are. So I started to realize this was very much a real trend. There were a lot of TikTok influencer partnerships where, you know, young women were doing Get Ready with me videos and saying they bought all of their products with afterpay and gave a link to the user on how to make the purchase themself. And for payments, I go to Holiday Makeup in partnership with afterpay. Let's do it. I afterpayed all the items I used for this look, and you can, too just select after pay at your selected retailer. So, yeah, there was a ton of content there.
- [28:37]
A
I have to ask, have you ever used these services yourself? Because this whole cotton candy, everything in pink. And I just wonder, would this appeal to you?
- [28:48]
C
Yes, very much. Guilty of charge. My first time using Afterpay, I was about 20 years old in college, and this is right when the services started. So I was shopping for a formal dress for my sorority, and I filled my online cart with, you know, five dream dresses. I was going to go back and narrow down my choices dress by dress, and pick my favorite. But then at checkout, I noticed there was an alternative way to pay. And it said I could break the payments up over eight weeks and it wouldn't affect my credit score. So I thought, perfect, I'll try them all on, pick my favorite, and return the rest before that second payment is due in two weeks. And this worked for a while, you know, but eventually after pay became a habit, and I wasn't making those prompt returns. And I was thinking, you know, what. What's $40 every. Every two weeks? When in reality, you know, $200 would mean a lot to me at the time. So it really made spending more digestible, more palatable. And I actually think it was a gateway drug for me into later on credit card debt.
- [29:51]
A
That is so fascinating. You know, I mentioned earlier, and you point this out in your article, how women are 68% more likely to use Buy Now, Pay Later. Why is it that women are more drawn to this method of paying?
- [30:05]
C
Well, you know, I think it's really interesting. Overall, we don't see women in as much debt as men. There are two categories that some studies show women being in more debt than men, and those are credit card spending and student loans. So this may be less about how women spend money than it is about where they spend it. Right. So although Buy Now Pay later services are accepted on purchases as varied as airfare and electronics, now clothing accounts for more than half of the service's gross merchandise value. And women are obviously the bulk of those consumers. And that's why we see, you know, so many of these ads, like linked to outfits or fashion, because that's really targeting women. A financial expert that I spoke with actually said this is likely because women are taught more about smart spending and saving than they are about wealth growth, Whereas young men are taught, you know, how to grow wealth, how to engage with the stock market. So since these Buy Now Pay later programs are targeting women by pitching themselves to consumers as responsible spending, I think a lot of young women like myself when I was first encountering after pay at age 20, think, you know, what, this is gonna be safer than, you know, maybe opening a credit card or accruing interest in a way that I don't really like. For me, at least, I didn't really understand how interest worked when I was 20, so it seemed safe that I couldn't accumulate fees like that on afterpay.
- [31:29]
A
When you say safer, what do you mean?
- [31:31]
C
Yeah, I think, you know, the safety of it all is kind of. I've recently realized it's. It's a. Guys, you know, it's not really any safer than a credit card because, you know, you miss a payment here or there and it can really wreck your credit score. And, you know, now after pay can affect your credit score. It's still evolving how it's going to be reported to credit bureaus. But this is a recent development in the past few months. But when I was first using this in 2018, that wasn't the case. So I figured there's no way I won't have that next payment in my account in two weeks. And I want this nice thing now. And I've really set up, like, an installment payment way to buy it. So it feels pretty Risk free. You know, I think it felt more complicated to understand how credit cards work than it did this simple, well marketed, buy now, pay later service.
- [32:21]
A
That's really fascinating. How do you think social media factors into all this? I mean, it seems like anytime you open up TikTok, there's someone trying to sell you something.
- [32:29]
C
Yeah, social media, I think, definitely has a huge influence in this. I think this kind of has to do largely with, like, the evolving American dream, right? So Americans once dreamed of, you know, the white picket fence home with three kids and a golden retriever. Right? Now many younger Americans are dreaming of renting that, like, $5,000 studio in Tribeca. It has nothing to do with ownership for the long run. It has everything to do with the present moment and the ability to show off. Right. And that's really encouraged by social media. One source I spoke with actually described social media as our generation's homeownership. And our feeds, you know, with their photos or meals or outfits, which can all be, you know, bought on installment payments.
- [33:12]
A
Wow.
- [33:13]
C
Are the way we prove that we've made it. And Gen Z, in many ways, is the embodiment of the phrase, you only live once. YOLO. We were born into 9, 11. We were experiencing our childhoods through the Great Recession. We, you know, experienced Covid during either our pivotal teen years or as we were first entering the workforce. And I feel like we've been told since we were kids that, you know, there would be no Social Security left for us once we retired, that the world was burning due to climate change, that we'd never pay off those student loans. So it's hard to blame Gen Z for, you know, kind of having this screw it, let's have fun mentality. Let's show it all off online. And I hear my friends say all the time that, like, money is fake. And I'm very guilty of saying this myself. You know, we're told we can't buy houses ever, that we're not gonna be able to afford it. So it's kind of like, yeah, let me buy that outfit that makes me look like I'm in a certain league, even though, you know, I'm. I'm paying for it in installments, and I can't really afford it. Social media kind of alleviates that pain by letting us at least cospl as wealthy or making it for a minute.
- [34:16]
A
Maybe you can help with something that I've seen on social media a lot. It was this term, girl math.
- [34:24]
C
Yes.
- [34:25]
A
Can you unpack that? Explain sort of what it is and how it relates to this cute debt that you were describing earlier.
- [34:32]
C
Yes, that was such a great opportunity for these installment payment services, wasn't it? So girl math, you know, it's only partly a joke. It really justifies reckless spending. One example would be like, okay, I didn't buy that $700 Gucci wallet. Now I have $150 to spend on dinner out with my friends. That's girl math. When in reality, you know, not spending that money doesn't mean that you gain that money. You might not have had it in the first place. So, you know, it feels very silly and harmless to be like girl math to justify any of your purchases. And I think that's, you know, really dangerous because for so many years, it was just a common trope that women are shopaholics and they don't. They can't control themselves when it comes to money. And that honestly probably kept us out of the game for money for many, you know, generations. Because I got to speak with so many financial experts about this. Like, we haven't necessarily been taught the same things that that boys were taught growing up about money. So a lot of times women are told, you know, just save your money. Spend wisely. But they're not really taught real financial literacy. So there's a lot of fear surrounding money for a lot of women, including myself. And, I mean, it wasn't until 1974 that women could even have their own credit card. So in a way, it's like, it's not our mother's faults for not being able to teach us the rules of a game they were never allowed to play. But I think, you know, that can be one reason why a phrase like girl math. It's almost like it's too recent to joke about because for so long, women were not allowed to play this game. And the fact that, you know, these marketing campaigns are really targeting that vulnerability feels very pernicious to me.
- [36:10]
A
You write, though, about how your parents raised you on Dave Ramsey, who is this popular expert when it comes to personal finance, I guess, and he has this money philosophy. Strict budgets, absolutely no debt. And I'm wondering, does that concept seem removed from reality for a lot of young people, or is it a thing of the past to spend responsibly? Or do you think that more people are taking it seriously or taking it to heart? What's your sense of it?
- [36:42]
C
Well, I think, yes, I was very much raised in a Dave Ramsey fearing home. We used the envelope system where when the envelope labeled eating out was empty, we would be having Hamburger Helper for the rest of the month. That was it. Which, you know, I thought, this sucks. Like, this is not fun. So growing up, I was always thinking, wow, how cool would it be to have, like a credit card and be able to buy whatever I want? But I do think generationally, you know, the Dave Ramsey approach, it's hard now because he's very anti credit card. And pretty much everyone taps to pay these days. And young people do everything on their phone. You know, like, you can get an Instagram ad and have that item on the way to your house within five minutes. So to sit down and, like, budget, like, with the strict dedication of a Dave Ramsey approach, it's really not too common.
- [37:32]
A
Now.
- [37:32]
C
I also think, you know, it goes back to that kind of sadly, that fatalistic worldview where it's like, let's live it up while we have the time. And I think so few people my age are thinking about the future because the future feels like this fictitious thing, which is really sad. And I wish, you know, I hope that changes. That paired with the need to be validated through likes and comments and engagement on social media is just like a nightmare combo. Right?
- [38:01]
A
Do you think that in the future there's gonna be a return to that old Dave Ramsey style of playing it safe all the time, or no?
- [38:13]
C
You know, I think that might be upon us. Like, my intuition is that the pendulum has to swing back eventually because, I mean, the credit card bills do. And I think people are gonna start to panic about that. I mean, even in my own life, I've seen that pendulum swing back. Like, I'm glad I checked myself at 25 and not at 35 on this, but yeah, I very much have a Dave Ramsey approach to finances now. And I think when you feel so out of control, when you feel so worried about making ends meet, you realize that no outfit, no trip, no glitzy Instagram posts could ever be worth that anxiety. So I think if more people get to that point, as a society, we might swing back. I also think that there's been a lot of glamorization of intimacy lately. Like intimate dinners, intimate. No phone parties. People are really loving to get off their phones now. So I'm hoping that has an effect on our whole social media obsessed world, that maybe if we're all off our phones, if we're, you know, reading books, talking to each other, all that stuff, maybe that'll keep us from buying those flashy things to show off online because maybe no one will care, you know?
- [39:28]
A
Annie Joy, Williams is an assistant editor at the Atlantic and author of the story the Rise of Cute Debt. You can check out her reporting@theatlantic.com Annie Joy, thanks so much for joining us on Business Wars.
- [39:41]
C
Thanks so much for having me.
- [39:42]
A
Next time on Business Wars, a company called Gatorade invented the sports drink category, but to stay on top, it'll have to constantly reinvent itself and get ahead of the competition. Make sure to join us. From Wondery. This is episode three of Buy Now, Pay later for Business Wars. I'm your host, David Brown Kelly. Kyle produced this episode. Our lead sound designer is Kyle Randall. Our producer is Tristan Donovan. Our audio engineer is Sergio Enriquez. Our managing producer is Desi Blalock. Our senior producers are Jenny Bloom and Emily Frost. Karen Lowe is our producer emeritus. Our executive producers are Jenny Lauer Beckman and Marshall Louie. For wondering.