Private Credit’s New Obsession: Buy Now, Pay Later

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Stacey Vanek Smith** (0:09)
Buy Now Pay Later has taken the US consumer market by storm in recent years, helping people break up payments for everything from computers to clothes to burritos.

**J.J. McCorvey** (0:18)
There's Affirm, there's Klarna, there's Afterpay, there's Sezzle, there's PayPal.

**Stacey Vanek Smith** (0:25)
JJ. McCorvey is a consumer protection reporter at Bloomberg. He's been following the rise of Buy Now Pay Later since the mid-2010s and the so-called phantom debt that comes with it.

**J.J. McCorvey** (0:36)
A lot of those short-term Buy Now Pay Later loans are not always reported to credit bureaus.
So, you know, something that analysts were telling us is that greater transparency was needed to kind of get a larger and fuller picture of a consumer's obligations. And I just never considered that there was like this larger machine kind of powering this industry until René and I kind of locked brains.

**Stacey Vanek Smith** (1:07)
René would be Bloomberg Private Credit Reporter René Ismail.

**René Ismail** (1:11)
It's very similar to, you know, when you hear the term shadow banking, right?

**Stacey Vanek Smith** (1:15)
Shadow banking, aka private credit. These are lenders who operate like banks but are less regulated. And now that industry is getting involved with buy now pay later companies.

**René Ismail** (1:27)
In terms of the appeal for a private credit manager, these are ways that the private credit manager can get access to a steady, predictable stream of short term assets, right? And for the buy now pay later firm, they love that because essentially they get to move risk off of their books.
So the buy now pay later firm will originate the loans, bundle them up, and then sell that on to private credit managers.

**Stacey Vanek Smith** (1:53)
For private credit, it's an exciting place to be. Buy now pay later is being used in more and more e-commerce sales in the US. Nearly 8% of total online spending in the first four months of 2026 happened through buy now pay later programs in the US, totaling nearly $29 billion.
Of course, the success of this partnership hinges on Americans' ability to repay these loans. And this is all coming at a time when US consumers are increasingly under strain.

**J.J. McCorvey** (2:24)
We just, we don't know what happens in a downturn, you know. So currently, US households have a record $19 trillion in debt right now, according to last month's CPI.
Inflation outpaced Americans' paychecks. And, you know, there are signs that Buy Now Pay Later consumers are having some trouble keeping up with the loans.

**Stacey Vanek Smith** (2:52)
I'm Stacey Vanek Smith, in for Sarah Holder and David Gura. And this is The Big Take from Bloomberg News. Today on the show, two opaque corners of finance come together. What private its involvement in Buy Now Pay Later means for consumers, why it's raising concerns, and whether some of the risks in this space could spill over into the rest of the economy.
When consumer protection reporter JJ. McCorvey and private credit reporter René Ismail began working together on their private credit meets buy now, pay later story, things quickly got a little bit paranormal. So you wrote this story that is very much under the radar in the financial world right now. There are a lot of big stories going on, and I feel like this is the convergence of two things we've heard something about.
One is private credit, which is often called shadow banking. The other one is buy now, pay later, which is sometimes called phantom debt. So essentially, you decided to report a story on shadow phantoms. This is how I've come to think of it. These are two esoteric worlds for people who may, at least have heard the term, but may not be familiar with it. What exactly is buy now, pay later?

**René Ismail** (4:13)
So, buy now, pay later is a flexible payment option that allows shoppers to take bigger ticket purchases and break them down into smaller, bite-sized payments that could be made over time.

**Stacey Vanek Smith** (4:26)
And as far as I understand it, you don't pay interest. You can just split up the payment. Instead of paying $100, you can just split it up into four payments of $25.

**J.J. McCorvey** (4:45)
And they were able to sell a lot of their products to a large company. And they were able to sell a lot of their products to a large company. And I think that's a really good example of how a company can sell a lot of their products to a large company.
I think I first started hearing about buying our pay later in the mid 2010s. And then you had competitors popping up over time, people embracing it at a faster rate, especially during the pandemic. I think a lot of us were at home looking for ways to spend all this extra money that we had. And tada, here are more options for you to spend. One more time.