Buy now, pay later and… consume more. At the intersection of fintech and online shopping are new e-commerce tools that get consumers to buy more and faster, regardless of the ability to pay back consumers. Third and last text of this series on e-commerce.

When you’re in the comfort of your home, cell phone in hand, browsing social media or shopping on Amazon, it’s easy to give in to the temptation of impulse buying. Online, everything pushes us to consume: enticing publications make us dream of the next good to own, payment methods could not be simpler … But overconsumption is not without danger for our wallet.

“If you shop online and have your credit card number pre-registered on your smart device, the transaction can be very quick. You don’t even have to move, and you can order in one click, ”notes Sophie Desautels, Licensed Insolvency Trustee at Raymond Chabot. For this reason, she advises keeping your payment information at bay – knowingly complicating your task, in short. “In that case, you have to get up, go get your wallet and enter your card number. That leaves more time to consider whether this is an emotional purchase or not; it leaves less room for impulsiveness. “

E-commerce platforms do the best they can to eliminate the friction that limits our propensity to click the “Order” button. But this simplicity of purchase – both in terms of the interface (like on Instagram’s commercial platform) than with regard to the method of payment (thanks to the services deferred payment, Where buy now, pay later) – can sometimes make us forget our real needs and, above all, our real ability to pay.

“Several unforeseen transactions that accumulate can cause us to enter the spiral ofindebtedness », Warns Mme Desautels.

If you shop online and have your credit card number pre-registered on your smart device, the transaction can be very quick. You don’t even have to move, and you can order with one click.

Should we then, for example, avoid deferred payment platforms which ultimately push us to consume more? “We can use these platforms, but with full knowledge of the facts, by learning about their operation, our obligations towards them and making sure we can repay,” says the union, who emphasizes that these new platforms are still unknown. and that few of its customers use them.

Consumers more at risk

Most of the time, shopping online means paying for your transactions using a credit card (even when you use deferred payment platforms, since they take the sums from your credit card!).

Many Canadian consumers – and, according to Statistics Canada, there are many – took advantage of the lockdown to pay off a record total of $ 16.6 billion on their credit cards in 2020. They therefore created an additional financial margin to consume more.

The situation is less rosy for those who have failed to do the same. Those people whose credit is already quite high or who have few valuable assets – like younger consumers, for example – are more likely to suffer the negative effects of impulsive overconsumption, observes Hélène Bégin, chief economist at Desjardins Securities.

It should also be understood that it is especially the latter who are targeted by these new online shopping tools, she notes.

These are mostly people who do not have in their possession assets that have appreciated for a year – think real estate – or whose budgets have remained very tight. Basically: young adults and that part of borrowers who can only pay off the minimum balance on their credit card. “The spread of payments particularly reaches this clientele” with a tighter financial situation, says Bégin.

Debt still worries little

Putting mortgages aside, the general debt load of Canadians declined in 2020.

Today, every Canadian household owes an average of $ 1.72 for every dollar it earns. Before the pandemic, that ratio was $ 1.74 per dollar earned, if not more. Rising property values, emergency government assistance and a prolonged shutdown of businesses contributed to this slight drop.

Insolvency cases slowed down during the pandemic, notes Sophie Desautels, of Raymond Chabot. So, after months of restrictions, it’s normal to want to spoil yourself – especially when you’ve spent less and been able to put money aside – but “it’s not because you have a little more flexibility now than it will still be when everything returns to normal, ”she believes.

“When you consume, whether online or in stores, you have to think about your monthly budget, but also think in the long term,” recalls the authorized syndic. This is even more true when we use deferred payment services that spread our expenses over the following months. It is better to have a tightly knit budget and keep an up-to-date register of withdrawals to be expected.

Over-indebtedness by deferred purchase is not a concern for personal finance specialists, however – in the short term, at least. That said, even if it is slightly better than a year ago, the debt level of Canadians could eventually catch up with them, says Julien Brault, creator of the personal finance application Hardbacon.

“The issue of household debt already existed before, but the arrival of deferred payment tools could make the problem more apparent,” he says. You have to know how to distinguish good credit – which allows you to acquire important assets, such as a house, or which makes it possible to pay for your studies – from bad credit – which indebts the consumer for everyday consumer goods, such as clothing.

“People who already have a problem of overconsumption could see this problem exacerbated by these tools,” adds Mr. Brault, who also distinguishes the positive in this case. “There is nothing too bad about seeing new competition emerge from the Amex, Mastercard and Visa of this world,” he concludes.

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