When pay-later services like Klarna, which was founded in Sweden, arrived in the U.S. about a decade ago, they were largely used for one-time, discretionary purchases like concert tickets and high-end clothing. But as inflation mounts, Americans are increasingly turning to them to finance something much more mundane and essential: what they eat, the New York Times reported. And there are signs that the use of these services for repeated, everyday expenses like groceries and restaurant meals is pushing some users, particularly younger people who are already overextended, deeper into debt. Pay-later companies say their products are a convenient tool — like layaway plans or credit cards — to help consumers manage their finances in tough times. The services, with breezy names like Zip, Zilch and Affirm, are easy to use, with well-designed apps, websites, virtual credit cards and widgets. Shoppers can apply for them in a checkout line and be approved in minutes. Unlike credit cards, most of the services don’t charge interest or require applicants to undergo extensive credit checks. There is usually a processing fee for each purchase, typically paid by the merchant. Pay-later companies are already commonplace in countries like South Korea and Australia. Buoyed by inflation and the rise in e-commerce, they have quickly gained a foothold in the United States, where $45.9 billion in pay-later transactions were made online in 2021, up from $15.3 billion the year before, according to GlobalData, a data analytics company. Food, which accounted for about 6 percent of those purchases, appears to be an important part of the growth. In the last year, Zip, a company based in Sydney, Australia, says it has seen 95 percent growth in U.S. grocery purchases, and 64 percent in restaurant transactions. Klarna reports that more than half of the top 100 items its app users are currently buying from national retailers are grocery or household items. Zilch, says groceries and dining out account for 38 percent of its transactions.
