Credit cards have a much more stringent approval process than BNPL loans have. Thin kabout it, a lot of people who COULDNT get a credit card are using BNPL, that's one of the main audiences of these.

If you have credit card(s), you would just use that generally speaking as it gives you a similar amount of time to pay it off with 0 interest.

This post was edited on 9/4/25 at 7:47 am

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Posted by Golgi Apparatus

Member since Sep 2009

3390 posts

Posted on 9/4/25 at 9:06 am to TX_Tiger23

quote:
So do credit cards, what’s the difference?

Look up quotes about credit cards when they were first being offered to the public.

There was the exact same boogeyman reaction youre seeing with BNPL.

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Posted by Golgi Apparatus

Member since Sep 2009

3390 posts

Posted on 9/4/25 at 9:17 am to thunderbird1100

quote:
Credit cards have a much more stringent approval process than BNPL loans have. Thin kabout it, a lot of people who COULDNT get a credit card are using BNPL, that's one of the main audiences of these.

Instead of a revolving credit line each and every BNPL transaction is being individually underwritten. So a quality credit model should perform better at declining purchase requests that would lead to delinquency over time.

I’m only going to use Affirm as a counter example because they’re the only one I know that doesn’t charge any late/hidden fees. And that in my opinion makes them a product worth using/investing in.

Evidence: Check out Affirms delinquency rates vs the major credit cards. It’s much lower.

Note: Klarna uses late/hidden fees às a significant portion of their income (17% last I saw). You could argue à company with that much incentive to capture fees might be approving loans knowing à percentage needs to be delinquent because it’s their actual business model.

This post was edited on 9/4/25 at 9:20 am

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Posted by bayoubengals88

Member since Sep 2007

24221 posts

Posted on 3/10/26 at 9:50 pm to BCreed1

The IPO was priced at perfection.
Buy the turnaround story.
$15/share is a fantastic opportunity.

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Posted by bayoubengals88

Member since Sep 2007

24221 posts

Posted on 3/10/26 at 9:53 pm to bayoubengals88

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Posted by bayoubengals88

Member since Sep 2007

24221 posts

Posted on 3/10/26 at 10:14 pm to bayoubengals88

**What Klarna Does:**
Klarna is a leading Buy Now, Pay Later (BNPL) provider, enabling interest-free installment payments for purchases, including small ones like DoorDash food deliveries (e.g., "burrito bowl financing"). It offers per-purchase approvals with real-time credit checks, avoiding the "blank check" risks of credit cards.

**Why Prospects Are Good:**
- **Low Risk:** Credit losses are just 0.44-0.54% of GMV, far below credit cards' 3-5%, due to short loans and automated underwriting.

- **Growth Potential:** Shifting to full digital banking (cards, savings), driving ARPU from $30 average to $107 for banking users—mirroring SoFi's model. Achieved 25% revenue growth to $3.5B in 2025, with massive expansion ahead.

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Posted by bayoubengals88

Member since Sep 2007

24221 posts

Posted on 3/11/26 at 9:38 am to BCreed1

This is a deal:

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Posted by bayoubengals88

Member since Sep 2007

24221 posts

Posted on 3/11/26 at 1:55 pm to bayoubengals88

Holy shite. The higher the loss, the bigger the gains...
See Jamie Dimon quote below.
No one understood this. They just saw ugly numbers and unloaded on the stock. This is an investment.

Grok:

quote:
2. How Losses Are Booked:

The Accounting MechanicsUnder IFRS accounting standards (which Klarna follows), credit losses for lending products like Fair Financing (6-24 month installment loans) and Pay Later are provisioned upfront at origination.

This means Klarna estimates and books the full expected lifetime credit losses (e.g., defaults) immediately when a loan is issued, creating an instant hit to current earnings. In contrast, revenue—such as interest income—is recognized gradually over the loan's life as it accrues.

Example from Klarna's Q4: For $2.5 billion in U.S. Fair Financing loans originated, Klarna booked $80 million in upfront provisions (expected losses) but only $40 million in immediate revenue, creating a $40 million "headwind" to current profits. However, this is expected to generate $180 million in future interest income as the loans mature.

Broader Illustration: In a hypothetical $1 billion loan cohort, upfront provisions of $40 million and partial revenue might drag transaction margins by $25 million in the first quarter, but add $60 million positively in later quarters, preserving overall lifetime profitability of $35 million. [SEE VIDEO BELOW]

Off-Balance-Sheet Sales: Klarna sells some loans via "forward-flow" agreements (e.g., $1.6 billion in Q4, yielding a $73 million gain), which accelerates revenue recognition but can introduce short-term fair value adjustments or losses on sale (e.g., $78 million funding cost impact in Q4).

This mismatch is amplified during periods of rapid growth, like Q4 2025, where Fair Financing GMV surged 165% YoY (accelerating to 193% in December) and tripled U.S. financing volumes.

Faster-than-expected adoption meant more upfront hits, pushing the quarter into a loss despite underlying strength (e.g., TMD before provisions up 31% to $622 million).

THIS IS EXTREMELY BULLISH

Similar concept:

quote:
“One of the fictions here is that the marketing cost ... gets booked over 12 months. The benefit of the card gets booked over 7 years. The card was so successful it cost us $200 million, but we expect that to have a good return on it. I wish it was a $400 million loss,” the chief executive said on “Squawk on the Street.”