When the interest is paid out of a store’s marketing expenses, it’s pretty ambiguous who specifically pays it, but the money ultimately comes from the store’s revenue.
If it results in higher prices, the people who actually use “buy now pay later” aren’t going to be the only ones paying more, since they pay the same price as everyone else. The costs are spread across all customers.
Depending on demographics, this could work as either a progressive or regressive “tax.”
Credit in general is an incredibly regressive tax; only the poorest end up paying much interest and it's a much larger fraction of their total cash flow. I can get between 2% and 4% cash back on all purchases on a credit card that I pay off monthly with a zero-fee ACH transfer, paying no interest or yearly fees. I literally take poorer or less financially secure people's money that they spend on credit card interest. While the prices I pay likely reflect an overhead of 1.5%-3.5% to cover merchant credit processing fees I potentially come out net positive.
Finally, if I had substantial investments, I would be earning returns for the ~month before having to liquidate assets to pay the credit card.
The bank financing my car loan is still paying me to have it because inflation is still so high and I got lucky with origination date.
In general I am skeptical of the overall societal benefit of new financial instruments for the above reasons. E.g. I can't imagine BNPL loans existing in a strong economy of mostly secure and economically savvy middle-class earners.
Yes, regular credit cards work that way, but this is different.
In the “buy now, pay later” scheme, the person getting the loan doesn’t pay the interest, or at least no more than any other customer. They’re getting subsidized by other customers.
Calling it a tax is about as enlightening as calling government insurance programs "ponzi schemes".
A tax is a deadweight loss in one sector that (hopefully) funds something else in a (hopefully) net-worthwhile way.
Calling a facilitating cost like marketing or finance or customer support a "tax" is like calling the need to pay to clean the bathrooms at your business a "tax", if you squint and look at it from far away it's kind of similar but it’s also totally uninformative.
In some abstract way, the social obligation for small businesses owners to send their kids to pricey afterschool classes is a "tax" paid by their customers, but that's probably not a useful way of analyzing a complex system
Fair enough. My main point is that the interest expense is being paid collectively, not individually. The same could be said of all sorts of other things.
If it results in higher prices, the people who actually use “buy now pay later” aren’t going to be the only ones paying more, since they pay the same price as everyone else. The costs are spread across all customers.
Depending on demographics, this could work as either a progressive or regressive “tax.”