Large purchases, such as furniture, are usually the focus of buy now, pay later programs. However, one service is now entering the fast food industry.
DoorDash launched a new relationship Thursday with Klarna, a financial company that allows clients to arrange modest payments over a predetermined period of time.
According to a press release, DoorDash customers will be able to use Klarna to pay in four interest-free installments or postpone payments and select a “date that aligns with their paycheck schedules” when the option opens “soon.”
Over the past few years, Buy Now, Pay Later (BNPL) services—which also include Apple and Affirm—have been increasingly popular. The extensive usage of these services, coupled with a lack of transparency and minimal regulatory monitoring, has many economists and consumer activists questioning how much debt Americans are really accruing.
According to Adobe, BNPL usage “hit an all-time high” during the holiday shopping season last year, generating over $18 billion in online spending, which is a roughly 10% increase over the same period the previous year. Younger, financially stressed consumers who want to extend their paychecks are especially drawn to the idea.
According to data from the Kansas City Federal Reserve, the BNPL providers charge merchants 1.5% to 7% of the transaction price in order to profit. According to RBC Capital Markets study, online BNPL services increased average ticket sales by 30% to 50% and the proportion of clients who made a purchase, proving that the costs are worthwhile for certain shops.
The amount of debt owed by Americans has increased significantly. According to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, total debt levels rose by 0.5% to $18.04 trillion in the fourth quarter of last year.
The percentage of households that go extremely overdue (skip a payment for 90+ days) on their credit cards and vehicle loans is at an all-time high, according to that research.
In the weeks leading up to its planned listing on the New York Stock Exchange, Klarna is continuing to broaden its product offerings, which includes the cooperation with DoorDash. The Swedish fintech company leveraged the BNPL frenzy, which is expected to reach $160 billion over the next seven years, by announcing last week a 24% increase in 2024 revenue.
In addition to delivering meals, DoorDash enables customers to purchase expensive goods from independent retailers like the Home Depot and Best Buy.
This report was contributed to by Alicia Wallace of CNN.
DoorDash will let users buy now, pay later for fast food, a possible worrying sign for the economy.