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More Klarna customers are having trouble repaying their “buy now, pay later” loans, the short-term lender said this week. The disclosure corresponded with reports by lending platforms Bankrate and LendingTree, which cited an increasing share of all “buy now, pay later” users saying they had fallen behind on payments.The late or missed installments are a sign of faltering financial health among a segment of the US population, some analysts say, as the nation’s total consumer debt rises to a record $18.2 trillion and the Trump administration moves to collect on federal student loans.Shoppers who opt to finance purchases through BNPL services tend to be younger than the average consumer, and a study from the Federal Reserve last year said Black and Hispanic women were especially likely to use the plans, which customers of all income levels are increasingly adopting.“While BNPL provides credit to financially vulnerable consumers, these same consumers may be overextending themselves,” the authors of the Federal Reserve study wrote. “This concern is consistent with previous research that has shown consumers spend more when BNPL is offered when checking out and that BNPL use leads to an increase in overdraft fees and credit card interest payments and fees.”As Klarna grows its user base and revenue, the Swedish company said its first-quarter consumer credit losses rose 17% compared to the January-March period of last year, to $136 million.A company spokesperson said in a statement that the increase largely reflected the higher number of loans Klarna made year over year. The percentage of its loans at a global level that went unpaid in the first quarter grew from 0.51% in 2024 to 0.54% this year, and the company sees “no sign of a weakened U.S. consumer,” he said. More consumers are using ‘buy now, pay later’ plans Buy now, pay later plans generally let consumers split payments for purchases into four or fewer installments, often with a down payment at checkout. The loans are typically marketed as zero-interest, and most require no credit check or a soft credit check.BNPL providers promote the plans as a safer alternative to traditional credit cards when interest rates are high. The popularity of the deferred payment plans, and the expanding ways customers can use them, have also sparked public attention.When Klarna announced a partnership with DoorDash in March, the news led to online comments about Americans taking out loans to buy takeout food. Similar skepticism emerged when Billboard revealed that more than half of Coachella attendees used installment plans to finance their tickets to the music festival.An April report from LendingTree said about four in ten users of buy now, pay later plans said they had made late payments in the past year, up from one in three last year. According to a May report from Bankrate, about one in four users of the loans chose them because they were easier to get than traditional credit cards.The six largest BNPL providers Affirm, Afterpay, Klarna, PayPal, Sezzle, and Zip originated about 277.3 million loans for $33.8 billion in merchandise in 2022, or an amount equal to about 1% of credit card spending that year, according to the Consumer Financial Protection Bureau. An industry that is coming under less regulatory scrutiny The federal agency said this month it did not intend to enforce a Biden-era regulation that was designed to put more boundaries around the fintech lenders.The rule treated buy now, pay later loans like traditional credit cards under the Truth In Lending Act, requiring disclosures, refund processing, a formal dispute process and other protections.The regulation, which took effect last year, also prevented borrowers from being forced into automatic payments or charged with multiple fees for the same missed payment.The Trump administration said its non-enforcement decision came “in the interest of focusing resources on supporting hard-working American taxpayers” and that it would “instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans.”Consumer advocates maintain that without federal oversight, customers seeking refunds or in search of clear information about BNPL fee structures and interest rates will have less legal recourse. There are risks to taking out installment loans Industry watchers point to consumers taking out loans they can’t afford to pay back as a top risk of BNPL use. Without credit bureaus keeping track of the new form of credit, there are fewer safeguards and less oversight.Justine Farrell, chair of the marketing department at the University of San Diego’s Knauss School of Business, said that when consumers aren’t able to make loan payments on time, it worsens the economic stress they’re already experiencing.“Consumers’ financial positions feel more spread thin than they have in a long time,” said Farrell, who studies consumer behavior and BNPL services. “The cost of food is continuing to go up, on top of rent and other goods so consumers are taking advantage of the ability to pay for items later.”The Consumer Federation of America and other watchdog organizations have expressed concern about the rollback of BNPL regulation as the use of the loans continues to rise.“By taking a head-in-the-sand approach to the new universe of fintech loans, the new CFPB is once again favoring Big Tech at the expense of everyday people,” said Adam Rust, director of financial services at the Consumer Federation of America. The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism. Cora Lewis, Associated Press
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E-Commerce
No place is more vulnerable to hurricanes in the 50 U.S. states than the Florida Keys.The chain of islands celebrated by singer Jimmy Buffett in his odes to tropical escapism is surrounded by water, jutting out 120 miles southwesterly from Florida’s mainland to Key West with the Gulf and Atlantic Ocean on either side.The archipelago historically has been known for its quirky and libertarian inhabitants who revel in the islands’ hedonistic, artistic, and outdoorsy lifestyle. In recent years, it also has become a haven for the wealthy.Overseeing safety for the more than 80,000 inhabitants of the Conch Republicthe nickname for the islands after denizens declared a tongue-in-cheek secession from the United States in the early 1980sis Shannon Weiner, director of emergency management for Monroe County, Florida.The Atlantic hurricane season starts June 1, and the county has some new weapons this season, including a brand-new emergency operations center and a new seawater desalination water treatment plant. The county also relies on surveillance flights from hurricane-hunting aircraft from the National Oceanic and Atmospheric Administration (NOAA) for information about how to prepare.But, the potential for a catastrophic storm like Hurricane Irma in 2017 is always at the back of residents’ minds. The Category 4 storm made landfall in the Florida Keys with winds up to 132 mph (209.2 km/h), destroying around 1,180 homes and seriously damaging another 3,000.Weiner recently talked to the Associated Press about the upcoming hurricane season. This interview has been edited for length and clarity. AP: Why is Monroe County perhaps the most vulnerable place in the 50 U.S. states for hurricanes?Shannon Weiner: Our entire island chain is surrounded by water. We have more water than we do land mass. Being uniquely situated between the two large bodies of water makes us very vulnerable. We see storms early, sometimes in their formationstorms that come across the Atlantic and then storms that develop in the south, in the Caribbean Sea. We tend to be in their path, and so we get a lot of storm practice here in Monroe County.Given your dependence on the National Weather Service and NOAA for hurricane predictions, how concerned are you about recent job cuts and budget cuts to the federal government?The weather service is a good partner, and the field offices, from what they were telling us and what they’re hearing here, everyone is secure. They are not expecting or anticipating any cuts to the (Florida Keys) field offices. So, of course, going into hurricane season, we’re really happy to hear that.Can we talk about Hurricane Irma? The Keys have always been vulnerable, but Irma was a shock to the system, right?The Keys had not had a storm of that magnitude or size since the early 20th century. People tend to get complacent. It’s human nature, right? They’re not as worried. They’re not as prepared. We were very fortunate with Irma in that we had plenty of days’ notice to evacuate. But when we came home and saw the devastation, it was an eye-opener. Being an island chain, we had unique challenges bringing logistics in to help us recover.Do residents typically evacuate when they are asked to?Usually, they tend to heed that advice. We are constantly reminding people to be prepared and how important it is in our county to evacuate because the Florida Keys, the entirety of the island chain, is a storm surge zone. People here tend to be pretty savvy when it comes to storms, and throughout the entire Keys, the bigger concern is storm surge rather than wind. We say, “hide from the wind and run from the water.”We are close to the start of the Atlantic hurricane season. What is keeping you up at night?The city of Key West is an incredibly resilient community. There’s a lot of history there. But there is also a lot of older architecture there. There are a lot of wooden homes, and for them to receive a storm, a direct impact of a major magnitude, that would be devastating for them. That is what keeps me up at nighta Category 4 or 5 storm hitting Key West.Given the Keys’ vulnerability, why do you think people choose to stay and live there?Because it’s beautiful here. It really is an island paradise. Being surrounded by a national marine sanctuary is amazing. I think everyone that lives here, we all live here for that reason. Because we appreciate the environment and the marine life and love the water. And so it’s worth it. You make sure that you’re prepared, and you have a plan if you need to go. And you go somewhere safe, and you come back, and you just put it back together. Follow Mike Schneider on the social platform Bluesky: @mikeysid.bsky.social. Mike Schneider, Associated Press
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E-Commerce
Hours before a federal law was set to take effect in January mandating that Chinese tech giant ByteDance sell TikTok’s U.S. operations, the social media app shut down. Though service was restored the next day, thousands of TikTok content creators were faced with the prospect of their source of income disappearing in an instant. The incident laid bare a common problem creators face: As social media algorithms change and platforms fold and emerge, creators need to find a way to grow their following and take it with them to different sites. That’s where LTK comes in. The 14-year-old company allows influencers to connect with brands, get commissions from products they plug, and hedge their bets by making money off any platform. The company also helps creators build a community thats not subject to the vicissitudes of social media platforms: When a creator links to a product via LTK on any social platform, consumers have the option of following that person on LTK as well. And the company helps creators carry their sponsored content deals from platform to platform as well. LTK, which raised $550 million in 2021 at a $2 billion valuation, works with more than 350,000 creators, 8,000 retailers, and a million brands. Today, LTK facilitates more than $5 billion in annual sales through its platform. The company was cofounded by Amber Venz Box, a content creator herself, who also serves as its president. Venz Box came on the Most Innovative Companies podcast to discuss how LTK is navigating ever-changing social media algorithms, the increasing amount of AI-generated social content, and consumer fatigue from sponsored content. Every creator I talk with says they’re seeing less and less return on investment from their social posts. How do you handle that trend as a company? Social media has changed a lot in the last year specifically. Until 2024, social media was a place to follow creators and be part of communities. You had control over your feed. [Instagram head] Adam Mosseri came out in January and said this year the majority of what you see is going to be recommended content [that an algorithm selects]. We saw and felt that. If you had 100,000 impressions in January, you ended the year with about 25,000 impressions per post. How do you deal with those changes? We saw, as early as 2015, 2016, that their business is built on advertising. Our business is not built on that. So there are incentives that are misaligned. You have to displace a piece of creator content in order to insert an ad. That was the beginning of us thinking that we need to start planning. Snap also scaled quickly [around that time]. We were seeing the rise of a major scaled platform almost every two years, which presents fragmentation risk for our creators. We also saw consumers shift from desktop content consumption to mobile. At the end of 2016, we realized we had to create a home base for our creators because when you play this tape forward, it’s not great for our industry. So by 2017, we launched the LTK app. That is where everything lives for [our creators], where they house their community, and [where] they could start using social media as a marketing platform. Is video a big part of your business? We introduced video to our platform 2017. Over the last two years our creators have produced 300% more video. It’s quickly becoming the largest content type on LTK and it’s the most important. We know that consumers really resonate with video. There’s a higher trust with that, and as a creator, I’m actually selling trust. Ultimately, I need to be in a relationship with my followers and video is the best way to do that. We totally rebuilt the app and relaunched it this year to be video-first. When it comes to [the shutdown of] TikTok, we were the first generation to be fully disenfranchised for a minute. Our users were able to feel firsthand what it meant to have their community pulled. They need a home base to own their audience. We saw a huge uptick and people setting up their LTKs and driving their community over to the platform. These days, consumers can spot sponsored content and advertising from a mile away. What are some of the ways a creator can stay authentic and also sell things? Creators definitely don’t win by tricking people. For example, if I tell you this mascara is a tubing mascara and it’s not going to smudge on your face, and then when you try it and it smudges and it’s total crap and it’s flaky, you’re never going to trust me ever again. Creators need to be truly helpful. The environment we’re in this year is so wild when it comes to trust because there’s just a lack of it across the internet. Consumers are looking at AI creators across TikTok. Mark Zuckerberg says the vast majority of content you’re going to see on his platform is going to be machine created. Those are super low-trust things. Being a human creator is a differentiator. How does LTK make money? When you look at the monetization structure, our incentives are aligned with the whole ecosystem. The creator wants to create content that resonates with consumers. When that content resonates, the consumer makes a purchase. In that case, the brand pays a commission or transaction fee to that creator. If you go to Sephora, maybe somebody’s getting a commission. If you go to me online and buy the lip gloss from me, I’m going to get a commission. That’s one piece of the business. The other half is when brands come into our brand platform and say, Hey, I actually am launching that new lip gloss and I want to make sure everyone talks about it. They can find creators and have them do paid collaborations. The creator can accept offers through the platform or not. They’re being paid a flat fee to talk about the product. LTK has tons of other [revenue-generating] products, but if you want to think of it in two core ways, it’s really the transaction revenue and then the campaigns or the collaborations. Some of your competitors make money from affiliate links. What differentiates your business? We’ve created a whole platform where creators set up and run their business. [We help with] everything from content creation and distribution to partnerships. There’s a really rich technology stack that doesn’t meet the consumer eye. And when it comes to consumer distribution, we have 40 million consumers. Thats about 38% of millennial and Gen Z women who are using LTK right now. LTK is in a category of its own pursuing a vision to be the creator app in the same way that LinkedIn is the professional app orStrava is the running app. As a marketer, you want to leverage a creator who’s able to reach their audience. In January of this year, Adam Mosseri came out and said that stories are not a distribution point. They’re for friends who are friends in real life and know each other well. Everything he says comes true, so we should expect for the degradation of story reach even further than it already is. If you’re a brand marketer, it’s not great news. If you are working with a platform that is just providing affiliate links, then you may not have a place to use those links [when the algorithm changes]. Were providing a home base to creators that’s separate from the influencer marketing platforms and storefront affiliate type of platform. LTK raised $300 million from SoftBank in 2021. Is the company profitable? Yes. We’re really unique for a SoftBank investment. My husband and I started the business and self-funded it. It has remained within our family and we still both operate it. I’m the president and he’s the CEO of the company. Ten years in, we decided to give some relief to some of our shareholders. We were already a profitable business. What SoftBank allowed us to do is give some reward to people who had been with us for about 10 years and run our road map forward. Since that time, we’ve more than doubled the business. And we remain EBITDA positive. Are you incorporating AI and machine learning into LTK? Our team uses a suite of 20 different AI companies and products to be more efficient, whether it’s from legal to design to everything else. At LTK we think that our creators being human is their superpower, but we can make them more efficient. AI is being used across all of our services. We’ll be releasing AI music, which is music that’s custom-created for the videos and content that our creators have made. We also use AI to pre-tag their content. The CRM for our creators is also totally automated. Were also using it to send the right message to the right customer at the right time [to get them to buy something]. We sent over a billion notifications last year on behalf of our creators to their customers. On the brand side, we’re building campaigns for them in partnership with the right creators. The vast majority of creators we are recommending to brands are based on AI insights. Will you ever let AI influencers on the platform? We will not. The human promise is so important. There’s been a lot of articles that have come out actually about AI creators. They can gain a following and they look so real, but ultimately we think there’s a lack of trust. They’re not going to know that something ships faster, how it fits you. Again, it becomes like an ad, right? Because anything they’re going to be doing in that context is going to be because they were paid or told to by someone. So we will remain a human app, but it’ll be powered by AI. And the music might be created by AI, but the person that you’re chatting with and all that is real.
Category:
E-Commerce
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