You know the economy’s in a weird place when Beyonce tickets and late-night DoorDash orders are getting financed like mortgages.
What happened: A growing number of Canadians are turning to buy now, pay later (BNPL) loans to buy everything from pricey concert tickets to basic groceries. Klarna, one of the top BNPL providers globally, saw its Canadian user base nearly double in the past year.
- Affirm, another major BNPL provider, says that last quarter, ticketing and travel purchases on its platform jumped 26% year over year across Canada, the U.S., and the U.K.
- This year’s Coachella festival made headlines when about 60% of general admission attendees used BNPL to foot the bill for passes that started at around $820.
Why it matters: Whether it’s for $1,000 Coldplay tickets or a Chipotle burrito bowl, BNPL is making it easier for younger consumers, in particular, to buy stuff they can’t really afford.
- Gen Zers and Millennials, who typically have less savings to fall back on, now make up 72% of BNPL users in Canada.
- Fast forward to when these loans come due, and many users aren’t able to pay them off. Klarna saw its losses from unpaid loans jump 17% in the first quarter compared to a year prior.
Big picture: As Canadians fall behind on credit card and mortgage payments at rates not seen since the aftermath of the 2008 financial crisis, easy-to-get loans wrapped in fun packaging may be laying the groundwork for a new kind of credit crisis.—LA