Point-of-sale finance companies Afterpay, Splitit and Sezzle have found their moment during the pandemic, as Canadians turn to online shopping for a quick shot of dopamine
With full COVID vaccination rates hitting 63% in August, Canadians are all set to feel good. But what Pfizer, Moderna and AstraZeneca have given us in antibodies, we are still sorely lacking in dopamine. For this, there is the activation of online shopping through instant loans from Afterpay, Splitit and Sezgle.
Point of sale financing options are by no means a new concept. The first iteration of the layaway was conceived during the Great Depression of the 1930s, an equally terrible and unprecedented collective experience. The new kids of retail credit, however, are spinning the format in a way that appeals only to a population that is bored as hell and homebound. Before the pandemic, purchases were larger and received later. In the case of Afterpay and co., Applicable purchases are cheaper – more tie-dye tracksuit than refrigerator – and delivered upon payment of the first installment (usually a quarter of the total). An example: The cost of Clinique’s popular Dramatically Different Moisturizing Lotion, which sells for $ 39 at Sephora, is divided into increments of $ 9.75.
While the fine print differs by vendor, these options, now available at checkouts at major retailers like Aritzia, Sephora, and Wayfair, all offer credit or debit payment acceptance, immediate shipping, and the relative zero charge. credit checks (except in rare cases). The consequence is not a terrifying collection agency, but locking your account until the original charges are cleared and prevented from making further purchases, which, as internal metrics from Afterpay, you probably will.
The fast-paced nature of retail credit lends itself to the fun time we find ourselves in: A recent Statistics Canada report recorded a dramatic shift in consumer behavior, with online shopping increasing 99.3% between February and May 2020 — our halcyon leavening days and e-commerce sales hit a record $ 3.9 billion. If we had to take shelter in place, glued to Zoom, why wouldn’t we shop online? Better yet, if we couldn’t control a global, debilitating, airborne virus – or, lately, wildfires and myopic billionaires – why wouldn’t we mod our moods by paying $ 37 up front to make our legs smell sandalwood?
Financial decoupling from point-of-sale follies isn’t just inevitable, says Jackie Porter, a Mississauga-based certified financial planner, it’s the gist. “The escape factor is very present, especially now that shopping has become an activity, like a fun thing to do,” she says. “A lot of people struggle with mental health issues during the pandemic, and instant gratification is just an easy way to calm down; it does not appear to be causing any financial harm at the moment.
Porter notes that with low payments, consumers are not prepared to insist on how future payments will eventually add up. “There are some things wrong with that, because it’s like, well, how often do you actually do that?” She warns. “If you’re planning on buying a treat, like clothes or electronics, it’s part of your budget. With retail credit, you might not add it up or factor it into all of your other bills, especially if an expense comes out of nowhere in the future and you have [already committed] payment of installments for non-essential items.
Afterpay, with 11 million customers worldwide, offers an attractive alternative to the spinning trap of typical credit cards and is, as a result, flocked by the Millennials and Gen Z cohorts, who tend to be more reluctant. to indebtedness. A perfect storm of youth adoption and the long, long tail of psychological fallout brought on by the necessary isolation of COVID signals that the economic anesthesia of installment follies is here to stay. “We think, ‘Maybe this will make us feel better,” Porter says, “even if it’s only for a short time. ”
This article appears in print in the October 2021 issue of Maclean’s magazine with the title “Hydrate Now, Pay Later”. Subscribe to the monthly printed magazine here.