Eat now, pay later? What the Klarna-DoorDash deal means for debt and the economy

Klarna, the payments platform renowned for its innovative financial solutions, has entered a new partnership with DoorDash, the popular food delivery service. This collaboration enables customers to defer the cost of their takeaway meals through a “buy now, pay later” (BNPL) model, where payments can be made in four interest-free installments or at a later date. While this offering aims to provide convenience and flexibility, it has ignited a wave of online criticism and concern among consumers about its potential implications for personal debt and the overall economy.

As Klarna solidifies its position as a significant player among BNPL firms—serving over 18 million customers—it faces heightened scrutiny from its primary demographic: Generation Z and Millennials. Recent social media reactions have included memes joking about accumulating “11k in DoorDash debt” and videos expressing apprehension about a looming “credit apocalypse.” These reflections reveal a broader skepticism toward financial practices that exploit impulsive spending behavior, prompting critical questions regarding contributions to “phantom debt” that traditional financial institutions struggle to track.

The BNPL boom has dramatically reshaped the financial landscape over recent years. While paying in installments isn’t a new concept, the global BNPL market has expanded ten-fold since 2019, significantly fueled by pandemic-driven online shopping, growing cost-of-living pressures, and rising interest rates. To highlight this trend, consider the following statistics:

• 1 in 8 UK adults used BNPL services for the first time last year.
• The UK BNPL market is estimated to be worth £27 billion, representing over 7% of the nation’s e-commerce and growing by a fifth last year.
• £250 million reflects the annual late fee total, incurred by customers who miss payments.
• In 2023, 53% of users reported paying a late fee.

The allure of these services lies in their user-friendly apps and the “soft” credit checks that allow consumers to access lines of credit often unavailable from traditional lenders. From car repairs and rental payments to vacations and even lawn care, users find increased flexibility in their financial choices.

Most BNPL companies generate revenue by charging the merchants a transaction fee. However, as interest rates rise, the costs associated with funding short-term loans have also increased. In response, many firms, including Klarna, are pivoting toward securitization: packaging loans and selling them to private credit investors. Yet, this strategy raises concerns about transparency, as Klarna and its competitors do not disclose the volume of these loans to credit agencies, fearing it may impact customer credit ratings and data security. Such practices have led to the term “phantom debt,” a state characterized by growing uncertainty surrounding individual borrowing capacities.

Regulatory scrutiny is escalating. The UK’s Financial Conduct Authority has mandated that starting in 2026, BNPL lenders must conduct affordability checks similar to those of traditional lenders, offer refunds, allow consumer complaints, and report loan data to credit bureaus. In the U.S., the Consumer Financial Protection Bureau (CFPB) has expressed concerns regarding “loan stacking,” a practice where individuals take multiple BNPL loans from various providers.

Currently, Klarna faces a unique set of challenges as it pushes forward with plans for an Initial Public Offering (IPO) in New York scheduled for April. Factors such as declining consumer confidence in both the U.S. and UK, alongside competition from firms with robust balance sheets like Apple, complicate this scenario.

However, the potential for the BNPL market remains substantial. According to Juniper Research, this market could reach nearly $700 billion globally by 2028. Klarna has reported profitability and possesses a banking license, and its reliance on short-term loans instead of long-term capital lends it a degree of resilience against interest rate fluctuations.

The private credit market, worth approximately $14 trillion, has seen a surge in “slicing and dicing” of loans into tradable securities. A scenario where consumer defaults on everyday purchases, like a pizza, leads to broader systemic issues is alarming; although some experts may consider such concerns exaggerated.

In conclusion, Klarna’s partnership with DoorDash may provide consumers with immediate relief and financial flexibility, but it also raises important questions about debt management and economic vulnerability. As BNPL services continue to evolve amid changing consumer habits and tighter regulations, it remains critical for users to stay informed about their financial choices. While these services offer convenience, understanding the implications of using them is essential for maintaining healthy financial practices in an increasingly complex credit environment.

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