Point-of-sale financing companies Afterpay, Splitit and Sezzle have all found their moment during the pandemic as Canadians turn to online shopping for a quick dose of dopamine.
With total COVID vaccination rates hitting the 63 percent mark in August, Canadians have a lot to feel good about. But what Pfizer, Moderna and AstraZeneca have given us in the form of antibodies, we still lack dopamine. For that, there is online shopping enablement courtesy of Afterpay, Splitit and Sezzle retail credit loans.
Financing options at the point of sale are by no means a new concept. The first iteration of layaway was conceived during the Great Depression of the 1930s, an equally terrible and unprecedented collective experience. The new children of retail credit, however, modify the format in ways that uniquely serve a population that is bored and homebound. In the days before the pandemic, purchases were larger and received later. In the case of Afterpay and company, the corresponding purchases have a lower price (more tie-dye sweatshirt than refrigerator) and are delivered with the payment of the first installment (generally a quarter of the total). An example: the cost of Clinique’s dramatically different popular moisturizing lotion, which sells for $ 39 at Sephora, is divided into $ 9.75 increments.
While the fine print differs by vendor, these options, now available at the checkout points of reputable retailers such as Aritzia, Sephora, and Wayfair, offer acceptance of credit or debit payments, immediate shipping, and the relative absence of fees and verifications from credit (except in rare cases). The consequence does not come as a scary collection agency, but instead in locking your account until the original charge is settled and you are prevented from making any further purchases, which, as Afterpay’s internal metrics show, it likely will.
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The fast-hitting nature of retail credit lends itself to the indulgent moment we’re in: a recent Statistics Canada report recorded a sea change in consumer behavior, with online shopping increasing 99.3 % between February and May 2020. Happy sourdough days and e-commerce sales hit a record $ 3.9 billion. If we had to shelter in place, glued to Zoom, why wouldn’t we shop online? Better yet, if we couldn’t control a global, debilitating, airborne virus, or lately wildfires and short-sighted billionaires, why wouldn’t we modulate our mood by paying $ 37 upfront to make our legs smell like sandalwood?
Financial decoupling from point-of-sale waste isn’t just inevitable, says Jackie Porter, a Mississauga-based certified financial planner, is the point. “The escape factor is very much present, especially now that shopping has become an activity, a pleasant thing to do,” he says. “A lot of people are struggling with mental health during the pandemic, and instant gratification is just an easy way to calm herself; it does not appear to cause any financial damage at this time. “
Porter notes that with low fees, consumers are not prepared to stress over how future payments will add up. “There are some things wrong with that, because it’s like, well, how many more times are you really doing this?” warns. “If you plan to buy a gift, like clothing or an electronic item, that is in your budget. With retail credit, you may not add it up or factor it into all your other bills, especially if an expense comes up out of nowhere down the road and you’ve already [already committed] to pay fees for what is not essential. “
Afterpay, with 11 million customers worldwide, offers an attractive alternative to the typical credit card revolving trap and is consequently frequented by cohorts of millennials and Generation Z, who tend to lean more towards debts. A perfect storm of adoption by younger demographics and the long tail of psychological fallout brought on by COVID’s needed isolation signal that the economic numbing of quota-based splurges is here to stay. “We think, ‘Maybe this will make us feel better,'” says Porter, “even if it’s just for a short time.”
This article appears in print in the October 2021 issue of Maclean’s magazine with the title “Hydrate Now, Pay Later”. Subscribe to the monthly print magazine here.