Point-of-Sale Financing is Another Step Towards Neoliberal Dystopia

Beware of installment payment plans!

They’re everywhere these days…

Over the past decade, there’s been a staggering surge in the “point-of-sale financing” market. McKinsey estimated these point-of-sale (POS) loans in 2019 accounted for over $100 Billion of the unsecured lending market, making them comparable to traditional personal loans. Companies like Arrow, Affirm, and AfterPay allow customers to “buy now, pay later” for goods ranging from groceries to exercise equipment to big-budget infrastructure projects. Instead of paying the full lump-sum all at once, buyers can pay smaller installments over a longer period of time.

On the surface, this appears to be a positive step towards financial accessibility. If someone needs groceries now but can’t afford the full bill until payday, then this piecewise payment model benefits everybody.

Customers win because they get what they need when they need it, and companies win because customers buy more stuff than they would have been able to afford otherwise.

The problem with these POS financing solutions is that they don’t actually make goods and services more affordable, they just defer the financial burden a few weeks into the future. They position themselves as the “market solution” to much deeper systemic issues, like the overpriced healthcare system in the U.S., and inhibit significant reform by providing a temporary palliative.

It’s true these deferred-payment systems can be useful for people who pay on time. After all, most of these companies offer interest-free plans. Customers have nothing to lose (except their data) if they use these services as temporary credit cards.

The twist comes when we look closer at the business model and discover these POS financing companies know that customers will end up buying more stuff than they can afford. It’s baked right into their pitch for retail partners: “Affirm boasts that its merchant clients report a 85% increase in average order value when consumers opt to use its BNPL [Buy Now, Pay Later] plan over other payment methods.” The lower up-front cost gives customers a false perception that things are more affordable than they actually are, so we fill our carts a bit extra to feel like we scored a lot of stuff for not much money.

This “free market” solution is nothing more than a freshly paved slippery slope into Debt Town for the people who are already the most financially disadvantaged.

The worst application of POS financing systems is the exploitation of pharmaceutical patients. Using POS financing plans for life-saving drugs like EpiPen, insulin, and opioid-recovery medication is just modern price skimming. With the help of exclusive distribution rights (a pharma industry standard), companies can now raise prices as high as they like and simply rely on increasingly incremental incremental-payment plans to offer manageable monthly payments to the desperate patients. Pharma companies can ride up and down the demand curve at whim. All that changes is the amount of time patients spend indebted to the POS company.

We’re likely just a few years away from companies offering payment plans to pay off other payment plans — all through some beautifully designed app.

Conclusion

We shouldn’t allow sham innovations like point-of-sale financing systems to distract us from the true underlying problems of our economy. Payment plans don’t truly help people whose lives depend on overpriced, patented healthcare treatments. We can’t fix market-created problems with market-created solutions.

Instead of shifting a bigger burden onto consumers, companies should first look to utilize the spoils of neoliberal rapaciousness over the past 40 years — slash their exorbitant executive salaries and lobbying budgets — to lower costs.

These POS loans are now growing twice as fast as traditional personal loans. We have to address this latest act of neoliberal self-entrenchment, otherwise the wealth gap will grow excruciatingly wide, disturbingly fast.

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