*DoorDash is known for supplying food to soothe a savage stomach, but those same customers could face empty wallets to go with their full bellies after paying for the service.
Buy now, pay later (BNPL) is the notion for DoorDash amid news of it and the soon-to-IPO payment company Klarna recently forging a partnership that gives folks the choice to do the normal thing and pay instantly on food orders via Klarna, split the cost of the meal into four installment payments for purchases greater than $35 or eventually push the payment to a later date, Business Insider reports.
DoorDash and Klarna executives further highlighted their efforts to make things easy on customers in a press release, saying the agreement was in intended to make “convenience even more accessible” for consumers and offer payment options that were “essential to meeting our customers’ needs.”
News of the DoorDash-Klarna announcement triggered mixed reactions among customers, with the Insider noting customers’ freedom to pay for a burrito taxi in $10 installments over a month and a half versus the partnership bearing more risk than reward for consumers,who would have another bill to occupy their already mounting debts
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Pointing a consumer looking to get a burrito, the Insider’s Emily Stewart broke down the particulars of the new DoorDash-Klarna pairing
“Look, to put it plainly: You almost certainly shouldn’t buy a delivery burrito using a buy now, pay later plan,” she warned. “I know it may be tempting. It’s burrito season, getting out of the house can be hard, and having stuff you do not need dropped on your doorstep is a fun tiny luxury of our tech-enabled world. But if you’re considering using a Klarna financing plan to DoorDash your Chipotle order, maybe take a beat.
With all the DoorDash fees, plus the tip — and, yes, you should tip — that little treat is going to run you quite a bit more than you bargained for,” she continued. “Splitting the cost up into four payments may make you feel better about your little indulgence — and may even encourage you to add on a second little treat. But there are some potential downsides. You might wind up missing payments, in which case on top of delivery fees and tip, you’ll also be hit with late fees and overdraft fees from your bank. By the end of it all, your $20 burrito could wind up costing closer to $70.”
According to the Insider, the BNPL industry has seen substantial growth in recent years, with companies such as Afterpay, Affirm, and Klarna leading the way. This growth is reflected in the increasing value of BNPL loans, as reported by the Consumer Financial Protection Bureau: from $2 billion in 2019 to $24 billion in 2021, and $34 billion in 2022.
While initially perceived as primarily for large transactions, the BNPL industry and its impact are now evident in the widespread adoption of splitting payments into smaller, interest-free installments for timely payments.
In addition, the comparison with credit card companies finds that buy now, pay later companies don’t do extensive credit checks. meaning the option may be more accessible to some consumers.
“We’re seeing it for smaller and smaller and smaller purchases,” said Anastasiya Ghosh, a marketing professor at the University of Arizona told Stewart. “Part of it is driven by these partnerships. So you see more and more merchants like DoorDash that are willing to participate and engage, which to me signals there is a revenue stream.”
For more on the impact of BNPL and the DoorDash’s partnership with Klarna, click over to Business Insider on MSN News
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