TikTok: the buy now pay later trend explodes

A new trend post explodes on TikTok: publish the debts accumulated with the buy now pay later. What is it and how the BNPL works

A new craze is going crazy online and is called buy now pay later, literally "buy now and pay later". The meaning is clear: these are apps that allow you to buy online and pay later in installments. And so more and more users accumulate debt, which they will then have to pay back.

But what does TikTok have to do with it? The question is simple: tiktokers find vent on the net and confess their debts to their followers. In particular, TikTok users are increasingly reporting their use of Klarna, a Swedish app that allows you to buy products online, such as clothes and bags, and conveniently pay for them in installments. More and more tiktokers are showing up in short videos as they buy clothes with the app, receive payment alerts and some dance around showing the bill to be paid, complete with the caption "crippling debt." Millennials and Generation Z are the main users of the app, but its frequent use worries economists and the possibility that those accumulated debts will be paid later.

Buy now pay later: what is it and how BNPL works

The Buy now pay later, also called BNPL, is the payment in installments of a product that is purchased It is a formula widely used in the United States, where online users often resort to credit cards to go shopping. In Italy, on the other hand, it's not a very common shopping model, while it's growing more and more in Europe.

In fact, there are several companies that create apps that exploit the buy now pay later method, and among these there is the Swedish Klarna, very popular among Millennial and Generation Z buyers. Users of the app have an average age of 33, and the Swedish company recently obtained a valuation of about $46 billion, confirming its rapid expansion and increased use in Northern Europe.

The companies offering this credit service are emerging fintech companies, which compared to classic credit cards do not charge customers fees or high interest rates. For example, Klarna allows customers to shop and pay 30 days later for the full amount financed, or in 3 or 4 installments over longer periods with no interest. Instead, it is the retailers who accept this payment method that pay the fees.

Klarna and TikTok: what's going on

The BNPL payment method is very popular among users, but they often abuse it, as reported by the Bloomberg website. And since the users are young, on TikTok a new trend was born on the use of the Klarna app. More and more accounts are sharing their accumulated debt balances with tongue-in-cheek comments and using the app to make funny videos about how much they have to pay.

Joella Louisa, one of the TikTok users quoted by Bloomberg, explains, "In the past, when I didn't have money, I simply couldn't shop. Now with Klarna, I can." Except then she posts videos showing her anxiety about having to pay off her accumulated debt. Louisa explains, "Sometimes my debt is 1,000 euros and I don't have a good salary. Klarna makes people addicted to shopping."

BNPL: economists' fears

Apps like Klarna allow shoppers to buy clothes, bags and anything else that is enabled by the BNPL payment method at any time. Young fashion-addicted tiktokers confess that the temptation to buy is strong-a temptation they succumb to with buy now pay later, but one that leads them to load up on debt. The fear of economists is that this form of financing may encourage loans that cannot be repaid in the long run, generating a sort of bubble.

A major concern is the fact that the BNPL is not regulated and that there are no protection clauses for consumers, who are encouraged to spend without realizing how much debt they are accumulating. Explaining this is another TikTok user who uses Klarna, Megan Harkin: "It definitely encourages people to spend more, especially when people get paid at the end of the month. And sometimes when the end of the month comes, you don't realize how much you've spent and then half of your paycheck has gone for Klarna refunds."

In short, buy now pay later credit apps are convenient for younger people, but you have to know how to control yourself so you don't overspend and can pay off your debt.