In a groundbreaking move, DoorDash is joining forces with Klarna, a leading financial technology company, to introduce Buy Now, Pay Later (BNPL) services into the fast food sector. This partnership, announced on Thursday, aims to provide customers with a flexible payment option for their food orders, enhancing the overall experience for consumers who are looking for convenient ways to manage their finances.
Set to launch “soon,” this innovative payment method will allow DoorDash users to utilize Klarna’s platform to make purchases in four interest-free installments. Customers will also have the option to defer payments, enabling them to select a payment date that aligns with their paycheck schedules. This feature is particularly appealing to individuals who are budget-conscious and wish to avoid the burden of immediate payment.
The popularity of Buy Now, Pay Later services, which also includes competitors like Affirm and Apple, has surged dramatically in recent years. According to Adobe, during the previous holiday shopping season, BNPL usage reached an all-time high, generating over $18 billion in online spending — a nearly 10% increase compared to the same period in the previous year. This growth highlights the increasing reliance on BNPL options, especially among younger consumers who may feel financially strained.
While the convenience of BNPL services is attractive, economists and consumer advocates are raising concerns about transparency and regulatory oversight. Many are questioning how much debt consumers are accumulating through these services. Research from the Kansas City Federal Reserve reveals that BNPL providers typically charge merchants between 1.5% to 7% of the transaction price. Despite these costs, studies by RBC Capital Markets suggest that online BNPL offerings can boost average ticket sales by 30% to 50%, significantly increasing the likelihood that customers will complete their purchases.
As Americans increasingly turn to BNPL services, overall consumer debt levels have also been on the rise. The Quarterly Report on Household Debt and Credit from the Federal Reserve Bank of New York indicates that in the fourth quarter of last year, total debt climbed by 0.5% to reach $18.04 trillion. Additionally, the report revealed that the rate of households falling seriously delinquent on auto loans and credit cards has reached a 14-year high.
The partnership with DoorDash comes at a pivotal moment for Klarna, as the company continues to expand its offerings in preparation for a public listing on the New York Stock Exchange. Recently, Klarna reported a remarkable 24% increase in projected revenue for 2024, capitalizing on the booming BNPL market, which is anticipated to exceed $160 billion in the next seven years.
In addition to fast food delivery, DoorDash allows consumers to purchase large-ticket items through third-party merchants such as Best Buy and The Home Depot. This collaboration with Klarna is expected to attract a wider audience and further integrate BNPL services into everyday spending.
As the landscape of consumer finance evolves, the integration of BNPL services into sectors like fast food signifies a shift in how consumers approach their spending and payment options. With DoorDash and Klarna leading the charge, it will be interesting to see how this trend develops in the coming years.
