I smell a bubble
They wanted to do an IPO: https://www.investopedia.com/klarna-is-moving-toward-big-ipo-what-you-need-to-know-8748846
but they’ve been experiencing losses like this and have put the IPO on hold. With the losses getting worse, I have a feeling they won’t IPO anytime in the near future. Also, people failing to repay laxer loans like klarna means bad things for the market at large.
Their whole purpose is to psychologically trick people into buying more than they can afford. It only takes elementary level math to see this coming.
My company had a client who did those financed schemes where people buy furniture and TVs and stuff and pay in installments. The one bit of information that stuck with me was they expected 50% of customers to default. They went under.
I was about to say how can you run a business like that but it just clicked. The execs were running a scheme on the company itself. The company tricks financially illiterate customers (I sympathise, not denigrating) into debt and bankruptcy, ruining their lives, while the owners pay themselves handsomely and buy cars and mansions running the company into bankruptcy. But they walk away with all their toys paid for by the broken finances of their victims.
Fucking parasites.
Actually no, that’s not the scam.
The scam is the business plan which says they can still be profitable, so they can borrow cheaply from banks to pay themselves, then they leave just before the company tanks.
The whole economy is a pyramid scheme.
That’s pretty much the same as described above with a marginally earlier exit strategy.
sounds like a variation of a PE firm.
We gave out risky and predatory loans to people with bad credit and now they aren’t repaying them
Shocked pikachu
Live by the DoorDash bnpl die by the DoorDash bnpl
Wasn’t this the basis of the 2008 financial crisis?
There’s a really good movie called Margin Call about the crisis. It’s about a single night at a fictional company when they see what’s about to happen before anyone else.
I’m sure after a crisis of that magnitude we put robust safeguards in place that have only been strengthened over time.
Right? panic right?!?!
“market players”:
best i can offer is a rapist in the white house
No, it wasn’t mainly consumer credit that triggered the 08 GFC.
It was mostly collateralized debt oibligations made by basically sandwiching together a whole bunch of home loans together, and then those being traded around and held as assets in a largely opaque way.
Then the housing market did a whoopsie and crashed, and oops it turns out a whole lot of thr mortgage CDOs … were actually sandwiches made out of a bit of loans to people with good credit, and fair credit, and also fucking terrible credit.
So that all blew up rather fantastically.
The good news about whats going on now is:
CDOs still exist, the housing market is also crashing right now, the auto market and associated loans are also crashing and repos are hitting …all time? decade highs?.. and also general consumer credit is astoundingly overextended and failing, and the US under Trump is undermining the legitimacy of the USD as the de facto world currency with all these tariffs, which has also shocked the bond market which is now demanding higher interest rates on US govt debt (which means higher debt payments for thr US govt) and oh right of course the tariffs and purging all the immigrant workers will just generally crash the US economy.
… Oh did I say good news? Whoops, wrong word.
Yeah, 08 was the Great Recession.
25 is gonna be the start of the Second Great Depression, significantly worse.
thats why they secretely meeting in the middle of the night to amend the tax cut bills , the gop. they dont want thier dimwitted supporters and the news to cause panic.
it turns out a whole lot of thr mortgage CDOs … were actually sandwiches
I do like sandwiches tbf
Sorry, they’re now 30% to 60% more expensive.
but at least my salary has increased to match infla-
fuck
The real issue with 2008 is that the mortgages were being bundled and sold as securities. So lots of financial institutions (even those disconnected from mortgage markets) were all holding these toxic assets without anyway to unload them.
With Klarna, I suspect that most risk is with them and their stockholders.
The real issue in the 2008 financial crisis was that the ratings agencies lied about the risk of MBS’s, the securities themselves aren’t an issue as long as investors know what they’re getting into
I tend to see the big issue in having people too far removed from the investment/risk rather than the ratings themselves. Which is why I call out the bundling as securities.
No one at the time thought the ratings were bad because they bundled good and bad mortgages and were accounting for default rates. However, spreading the risk of mortgage assets to every financial institution meant there was no escape when the housing market burst.
Klarna’s customers are all J Wellington Wimpy
Buy now pay later! I kept reading it like the name of a tech company pronounced “beanpole”
This is what happened to a lot of pay day loan companies in the UK
Nobody is paying back their burrito loans!
Guess it’s time to send the repo man down to the sewage treatment facility.
BNPL over-extension and collapse was one of the things that led to the 1929 stock market crash. Back then, people were BNPLing things like RCA radios. Today it’s cell phones and groceries.
Too bad we can’t learn from history.
I’d argue the small loans are just a symptom of the underlying issue: overly unequal wealth distribution.
Oh man, people ain’t paying back their fast food burger loans?
