Buy Now Pay Later Like Ride Hailing Business? Growing But Flawed

Just because something is new doesn't make it sustainable, particularly as losses keep piling up.

While debit and deferred payment products continue to grow, profitability is not following.

The first warning sign I saw was when financial services companies like AfterPay and Klarna added advertising networks -- I just thought it was curious. What, printing money is not high margin enough?

Apparently not when you don't know who to lend to. While I don't like betting against Max Levchin ultimately (too smart) their losses are increasing also.

The net for me is this: the economy will keep inventing ways to lend money to people. It doesn't mean those things are particularly sustainable or that there is a real defensible moat.

At any time if these businesses are profitable, any of the major financial services firms could either buy or replicate them. The only thing that would prevent them from doing so would be regulation, which could be quite ironic because big tech companies don't seem to be subject to much regulation but older school companies are.

If you lend money and it's not repaid, then most banks would be killed by their shareholders. Many of the VC-backed businesses don't need to operate this way because they are trying to find a business model and get enough escape velocity to change the industry.

This industry despite its growth feels more like one whose major elements will be incorporated into existing financial services providers rather than remain independent.

In other contexts, you would call this a "feature" and not a "company."