DoorDash and Klarna are joining forces to let users pay for meal deliveries with installment loans, calling it \u201cessential to meeting our customers\u2019 needs.\u201d Not everyone sees it that way.<\/p>\n
The announcement has drawn a flurry of criticism on social media, less directed at the companies themselves than questioning what the need to use a \u201cbuy now, pay later\u201d service for food orders says about the increasingly debt-ridden economy.<\/p>\n
\u201cEat now, pay later? A credit apocalypse is coming,\u201d an X user wrote Thursday when the partnership was announced.<\/p>\n Another X poster used a photo of a forlorn-looking Dave Ramsey, the personal finance pundit, with the caption, \u201cwhat do you mean you have $11k in \u2018doordash debt\u2019.\u201d<\/p>\n Others whipped up \u201cSopranos\u201d memes, quipping about \u201cDoorDash debt collection outside your door because you missed a Chipotle payment.\u201d<\/p>\n The economic commentator Kyla Scanlon said in a social media video that the deal was another example of the \u201cgambling economy.\u201d<\/p>\n \u201cWe have memecoins, sports betting \u2014 we love a good vice in the United States, and we can do it completely frictionless,\u201d she said. \u201cWe don\u2019t even have to put on pants. Just app it to you and worry about everything else later.\u201d She added that \u201cthere are real winners and losers\u201d in business models that monetize not just convenience but \u201cimpulsivity.\u201d<\/p>\n Klarna, which is preparing for an initial public offering, is among the BNPL providers that have surged into virtually all corners of the consumer economy since the pandemic, such as Afterpay, Affirm and Sezzle.<\/p>\n The lightly regulated financial services give users a variety of ways to pay for purchases; among the most popular are short-term loans that can typically be repaid in several interest-free installments. The companies make money by charging users for late or missed payments and merchants for the ability to offer BNPL loans at checkouts.<\/p>\n DoorDash said customers will be able to use Klarna for many types of purchases on its platform, not just small-dollar food deliveries. They can pay in full up front, in four installments or else later on, \u201csuch as a date that aligns with their paycheck schedules.\u201d<\/p>\n A Klarna spokesperson acknowledged the online pushback but said any form of borrowing for food purchases is potentially concerning, depending on the circumstances.<\/p>\n \u201cIf people are in a situation where they feel like they have to put their food on credit, that\u2019s a bad indicator for society,\u201d the spokesperson said.<\/p>\n Still, many people make \u201ca rational decision\u201d to use BNPL services to help manage their money, the spokesperson said, adding that the new features would be available only for DoorDash purchases of at least $35 \u2014 a few dollars more than the platform\u2019s average order as of last March. \u201cWherever high-cost credit cards are accepted, consumers should be able to choose a zero-interest credit product, instead.\u201d<\/p>\n Indeed, industrywide data shows the short-term loans have become a routine feature of many consumers\u2019 wallets, particularly among young adults coping with inflation and with average credit card interest rates still near 20%.<\/p>\n The BNPL explosion coincides with record debt levels and mounting consumer pessimism. Total household debt exceeded $18 trillion at the end of last year, according to the Federal Reserve Bank of New York, with credit card balances comprising a record $1.2 trillion of that sum. Consumer sentiment fell this month to its lowest level since 2022, and borrowers\u2019 expectations for missing debt payments in the next three months hit their highest level since 2020, the New York Fed found.<\/p>\n A spokesperson for DoorDash didn\u2019t comment on the criticism of its partnership with Klarna, saying their collaboration \u201cprovides even more flexibility, control and options.\u201d The delivery service noted that its users can already pay with Venmo and CashApp, as well as government aid, including SNAP benefits. Klarna is already available on the grocery delivery platform Instacart, and it recently replaced rival Affirm as Walmart\u2019s exclusive BNPL partner.<\/p>\n Much of the concern over BNPL has focused on the potential effects on borrowers\u2019 credit histories, which largely still don\u2019t reflect use of the services despite years of discussions with credit-reporting bureaus to change that. Yet a study released last month by Affirm and the credit-scoring firm FICO showed most consumers with five or more Affirm loans saw no real downside to their credit scores, some of which actually increased. And consumers consistently rate BNPL products favorably in surveys. Last year, 89% of borrowers told TransUnion they were either satisfied or very satisfied with the services.<\/p>\n But personal finance experts and consumer advocates say the qualms kicked up by the DoorDash-Klarna deal reflect real financial risks.<\/p>\n \u201cMaking four payments to cover three tacos on Tuesday sounds complicated because it is,\u201d said Adam Rust, director of financial services at the Consumer Federation of America, an advocacy group. \u201cI wouldn\u2019t characterize this as a solution. It is a fintech innovation that creates problems.\u201d<\/p>\n Not only might users face Klarna\u2019s own late fees, he said, but \u201conce customers consent to repay with automatic debits, they risk additional overdraft fees\u201d from their banks.<\/p>\n Rust also highlighted recent work by the Consumer Financial Protection Bureau that remains in jeopardy or has been stopped altogether as the Trump administration defangs the agency.<\/p>\n The CFPB recently granted BNPL customers more ability to dispute charges and get refunds, but with staffers ordered to stop all enforcement activity last month, former employees and consumer advocates believe the rule has been rendered moot. A trade group representing fintech businesses, including some BNPL lenders but not Klarna, asked the Trump administration this month for an exemption from a law scheduled to take effect next week requiring certain lenders to verify borrowers\u2019 ability to repay loans before they front them money.<\/p>\n Financial planners have long cautioned clients against budgetary strains from BNPL overuse. Even some borrowers themselves who\u2019ve spent heavily with the services have begun warning others of their risks, saying they make it easy for cash-strapped users to rack up debts that are tough to pay off.<\/p>\n \u201cEat now, pay later is an awful trap,\u201d Douglas Boneparth, president of Bone Fide Wealth, an advisory firm focused on millennials, wrote on X last week. \u201cIf you need to borrow to have a burrito delivered to you, you are the product. Nothing more.\u201d<\/p>\n<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" DoorDash and Klarna are joining forces to let users pay for meal deliveries with installment…<\/p>\n","protected":false},"author":1,"featured_media":15059,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[],"class_list":["post-15058","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/dailywashingtoninsider.com\/index.php\/wp-json\/wp\/v2\/posts\/15058","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dailywashingtoninsider.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dailywashingtoninsider.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dailywashingtoninsider.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dailywashingtoninsider.com\/index.php\/wp-json\/wp\/v2\/comments?post=15058"}],"version-history":[{"count":0,"href":"https:\/\/dailywashingtoninsider.com\/index.php\/wp-json\/wp\/v2\/posts\/15058\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dailywashingtoninsider.com\/index.php\/wp-json\/wp\/v2\/media\/15059"}],"wp:attachment":[{"href":"https:\/\/dailywashingtoninsider.com\/index.php\/wp-json\/wp\/v2\/media?parent=15058"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dailywashingtoninsider.com\/index.php\/wp-json\/wp\/v2\/categories?post=15058"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dailywashingtoninsider.com\/index.php\/wp-json\/wp\/v2\/tags?post=15058"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}