Today, Explained: "Burrito Now, Pay Later" Episode Summary

Release Date: June 25, 2025
Hosts: Noel King and Kyla Scanlon
Guest: Akilah K. Johnson, Financial Times Journalist

Introduction: The Rise of Buy Now, Pay Later (BNPL)

In this episode of Today, Explained, hosts Noel King and Kyla Scanlon delve into the burgeoning trend of Buy Now, Pay Later (BNPL) services and their recent integration into traditional credit scoring systems. The discussion is anchored by insights from Akilah K. Johnson, a consumer finance journalist at the Financial Times.

Noel King opens the conversation by highlighting a significant shift in credit reporting:

"There is one company that 90% of US lenders check with before they decide whether to give you a loan for a house or for a car. It's a credit rating agency called FICO. Now, this week, FICO announced that when it calculates your credit score, it's going to include, for the first time ever, your Buy Now Pay Later purchases."
(00:02)

This move marks a pivotal change in how consumer debt is assessed, particularly as BNPL services become ubiquitous.

Understanding Buy Now, Pay Later (BNPL)

Akilah K. Johnson elucidates the mechanics and business model of BNPL:

"Buy Now, Pay Later or BNPL is basically a type of lending that's provided by companies that call themselves fintech... they allow shoppers and consumers to split their purchases into installments, and largely these installments are interest-free."
(02:18)

However, she points out the opacity in their revenue streams:

"So it's not entirely transparent. Each of them has a different sort of Breakdown of how they make money. But essentially they take a fee from the merchants."
(03:05)

Merchants favor BNPL as it boosts sales, but the real cost often falls on consumers through various fees.

Consumer Behavior and Overextension

The podcast features anecdotes illustrating consumer reliance on BNPL. Kyla Scanlon shares her extensive use of Klarna:

"I have spent $32,196.23 on a firm in Klarna since 2022... paying $43 today as opposed to paying $170 today full of makeup."
(03:28)

This behavior underscores a broader issue of impulse spending facilitated by BNPL's convenience.

Akilah further warns:

"Some of them also make money from late repayment fees... they're basically penalties that they take from consumers who don't pay on time."
(04:07)

The Dark Side: Debt Traps and Credit Implications

A critical turning point in the episode is the discussion on the risks of BNPL. Noel King poses a thought-provoking scenario:

"If you buy the burrito and then you decide you're going to default on it, what happens?"
(05:02)

Akilah responds by explaining the consequences of defaulting: late fees, potential blacklisting by lenders, and the negative impact on credit scores—especially now that FICO includes BNPL in credit assessments:

"The sector has come under pressure from consumer protection groups and there's also been a rise in defaults recently as people fear that the risks of a US recession are becoming higher."
(06:45)

Regulatory Landscape and Economic Implications

The lack of regulation in the BNPL sector emerges as a significant concern. Akilah highlights:

"The industry is so new that it's not regulated as credit in the US... perhaps that's the kind of missing piece in the puzzle that makes it a potentially more dangerous tool."
(10:13)

This regulatory gap allows BNPL companies to operate with fewer safeguards compared to traditional credit services like credit cards and mortgages.

Generational Perspectives: Gen Z and Debt Normalization

The episode delves into how younger generations, particularly Gen Z, perceive and utilize debt. Kyla Scanlon observes:

"Debt has been so normalized for the younger generation that when they see something like BNPL, it's like, oh, this is just casual debt."
(18:33)

She connects this attitude to broader economic challenges facing Gen Z, such as student loan debt and stagnant wages, which make BNPL an attractive but potentially precarious option.

Psychological and Societal Factors

Kyla introduces the concept of the "poor impulse control economy," where ease of access to credit fosters impulsive spending:

"The convenience and the impulsivity that it allows for, allows for the expansion of the grift economy of a world where people are spending money on things that they don't need."
(16:20)

She argues that this trend reflects deeper societal issues, including economic instability and the erosion of traditional safety nets.

Conclusion: Navigating the Debt Landscape

Wrapping up, the hosts and guest acknowledge the dual nature of debt as both a financial tool and a potential trap:

"Debt's not inherently a bad thing... It's all about how you use it."
(21:25)

Kyla emphasizes the need for balanced regulation to protect consumers without stifling financial innovation:

"We have to really start thinking through actual solutions to these problems because they're just not going to fix themselves. The incentives are too misaligned."
(24:46)

Final Thoughts

The episode serves as a comprehensive exploration of BNPL's integration into the financial system, highlighting both its conveniences and inherent risks. By incorporating expert insights and real-world examples, Today, Explained offers listeners a nuanced understanding of how BNPL is reshaping consumer behavior and credit landscapes.

Produced by Myles Bryan and Gabrielle Burbe, Edited by Aminah Elsadi, Fact-Checked by Laura Bullard, with engineering support from Patrick Boyd and Andrea Kristin's daughter.