When so-called BNPL — buy now, pay later — apps took off at the start of this decade, their appeal was easy to understand, since buying stuff is always easier if you don’t have to put up all the money right away. Their target audience was also pretty clear — Gen-Zers and Millennials who enjoyed making impulse purchases but who disliked credit cards. These days, retirees and others on fixed incomes have become some of the fastest growing users of the apps, and high interest rates have killed off some entrants into the field. What hasn’t changed? A lot of uncertainty over how BNPL companies can make money in the long run, and whether they’re actually providing a cheaper alternative to credit cards or just a new way to lure borrowers into unwise levels of debt.

How does BNPL work?

Typically by letting consumers pay for purchases in three or four installments. Most BNPL services spread them out over the course of a few weeks, often without interest, although many charge fees for late payments. Spending on BNPL purchases jumped from $33 billion in 2019 to $300 billion by 2023, according to GlobalData, a research provider; it projects that figure to rise to $570 billion by 2026.

Is This a New Idea?

Not really. The “installment plan” is a type of credit that really got going in the 19th century, as the Industrial Revolution offered consumer goods to the masses — if they could pay for them. Most famously, Singer sewing machines were sold for a “dollar down, dollar a week.” The practice of offering weekly or monthly purchase plans spread, as makers of furniture, pianos, farm equipment and automobiles looked to make products more attainable. Credit cards then broadened the practice of delaying payments to cover smaller purchases. But credit cards tend to be disliked by the young people attracted to BNPL; as a group, young shoppers are wary of providers that profit when customers don’t pay their balances.

Why Did BNPL Take Off?

Several reasons. For one, online shopping exploded during the pandemic. And investment poured into a roster of new startups that offered apps that were user friendly and targeted at young people making purchases for items costing $200 or less, including Klarna, Afterpay, Affirm, Zip and Zilch. Most BNPL isn’t about buying big-ticket items; it’s about using an app to snap up that must-have jacket in the expectation that you’ll pay it off quickly. The fact that there generally aren’t rigorous credit checks slowing down an initial purchase also helps. Finally, this corner of the fast-credit industry was able to grow at a blistering pace partly due to the lack of regulation.

How Has the Industry Changed?

BNPL started off with a focus on fashion and with a Millennial and Gen-Z consumer base. But the audience for such fast-credit apps has expanded. By December 2023, Klarna said the 60-plus group was the fastest-growing age segment —  with home and gardening climbing to one of the most popular categories for shoppers to use the product for. That’s seen as in large part being a reaction to inflation’s spiraling rise in recent years, which has many consumers of all ages looking for ways to stretch their money or put off paying bills a bit longer. To the dismay of regulators, people are using BNPL apps not just for one-time purchases but to pay for recurring costs such as energy bills, takeaways and even groceries.

How Are BNPL Companies Performing?

After initial rapid growth that led to heady valuations for some newcomers, they hit a rough patch. In 2022, Klarna saw its value plunge from $46 billion to $6.7 billion, while Affirm’s stock tumbled 90 percent by the end of the year, while Zip had shed about 95 percent of its value. (The firms have picked up to an extent since then.) That reflected three trends. One was a rush of new competitors into the field, including big tech companies like Apple Inc. and Amazon.com Inc., retail banks like HSBC Holdings Plc and Barclays Plc, Wall Street firms like Goldman Sachs Group Inc and Citigroup Inc and new major players in previously underserved markets, like Gulf-based Tabby and Huabei in China.

Another factor was the rise in interest rates engineered by many central banks to fight inflation. That raised costs for BNPL firms that were borrowing the money with which they made payments to merchants or lent to consumers, a burden that increased with the volume of loans. The inflation squeeze also meant that more BNPL loans went bad. In the first half of 2022, Klarna reported that its losses had tripled with high operating costs and credit losses. Since then, the firm has said that more people are paying back on time and default rates are at their lowest, at 1 percent. Still, nearly a quarter of BNPL users missed one or more repayments in the six months to December 2023 in the UK.

What is the BNPL Business Model?

There are several, but they all share one thing: When a customer uses buy now, pay later as a payment option, the BNPL provider foots most of the bill up front, paying the merchant the full amount. The customer then pays back the BNPL provider in installments. Since BNPL firms typically don’t charge interest, they turn to a variety of revenue sources: Some BNPL apps make money by charging retailers a small fee. Some also charge consumers late fees. Others make money off of advertising or have opened up subscription models for extra channels of revenue. Major partnerships with the travel and hospitality sector have been struck, and some have launched debit services too.

How BNPL Businesses Financed?

BNPL players often use partner banks as a source of funding. Some startups also secure debt financing from investors to pay for purchases in advance. For example, Zilch’s debt facility is funded by Goldman Sachs. Klarna is a bank, so it can use customer deposits from conventional bank accounts it offers in Sweden and Germany to fund its activity.

What Are the Downsides of BNPL?

Regulators and consumer advocates worry that it could be a form of irresponsible lending. Consumers grappling with accelerating inflation and rising interest rates could load up on debt using different apps and then overdraw their bank accounts or take on credit card debt to service their BNPL accounts. The Citizens Advice Bureau in the UK found one in five BNPL users had missed or made a late BNPL payment in the last twelve months, and almost a third who were due to make a payment in the last month borrowed money to repay their installments. More broadly, the possibility that BNPL leads people into a chain of borrowing could create hidden risks for the banking system.

Britain’s FCA says the sector must be regulated, while Australia’s BNPL firms will need to adhere to responsible lending obligations and hold Australian credit licenses, and California has fined unlicensed lenders. The companies themselves say they offer a cheaper alternative to the high interest rates on credit card bills, bank overdrafts, and revolving debt that are alternatives sources of funds for their customers.

By Aisha S Gani

Pamela Anderson is having a bit of a comeback of late. The Smashbox Cosmetics team hopes she can do the same for their struggling brand.

On Thursday, Anderson was revealed as the face of the brand’s new “OG” campaign promoting its Photo Finish Primer hero product. While she has been photographed for magazine cover and editorial shoots by the brand’s founder Davis Factor in the past, the campaign marks her first time appearing in a Smashbox ad.

“Now is a good time for us to have a face,” said Factor. “I thought she was perfect for the OG campaign because I created the primer back in the late 1990s, and she’s such an iconic figure.”

Following a fictionalised Hulu show, a Netflix documentary and a general obsession with Y2K style, Anderson has returned to the cultural zeitgeist with celebrities and influencers like Kim Kardashian paying homage to her style. Smashbox is the latest brand to ride the Pam resurgence wave after Proenza Schouler earned buzz last month with its campaign featuring her modelling its looks makeup-free. In late January, she acquired skincare brand Sonsie.

Smashbox, meanwhile, has seen a different trajectory in recent years.

“The pandemic just slammed us — literally obliterated us. We’re lucky to still be in business because of that,” said Factor. Estée Lauder Companies reported in its fiscal 2024 second-quarter earnings report on Feb. 5 that it had revised its internal forecasts for Smashbox due to lower-than-expected results. In December 2023, the brand shut down its Canada DTC site after undergoing layoffs in June 2023 and exiting the UK and Ireland in 2022.

“We really spread thin all over the globe. When you move away from a distributor model, and more into an affiliate model in all the Lauder offices, and they have somebody that’s attached to your brand, it’s a little bit more difficult,” said Factor. Outside the U.S. market, he said that India and Italy are still major areas of focus.

With Anderson, Factor is hoping to tap into nostalgia for the brand’s 1990s and 2000s heyday, when Smashbox rose to prominence as he used its primer and other products on countless celebrity photo subjects at Smashbox Studios. His initial foray into makeup had been inspired by the legacy of his great-grandfather Max Factor, who is credited with coining the term “makeup.”

Smashbox is one of numerous ELC portfolio brands that have struggled to regain the relevance that they held in the 2000s. The company shut down Becca Cosmetics in 2021, leaving production of two of its hero products to Smashbox. As ELC aims to steer its brands to a turnaround, nostalgia has provided classic brands with potential for a sales boost following the popularity of Clinique’s Black Honey lipstick on TikTok.

“We have a unique position. We’re the only photo studio in the world that has a cosmetics brand that was run by the people who invented commercialised makeup,” said Factor.

Learn more:

Pamela Anderson Purchases Stake in Sonsie Skin

The actress and activist has joined the premium skincare company as a co-founder and co-owner.

It is generally understood that the makeup artist Dame Patricia McGrath, of New York via Northhampton, is the greatest living practitioner of the form. In the future, when a temple is erected to the cosmeticians of our time, McGrath’s shrine will be appropriately outsized, and a site of its own pilgrimage; the Holy Mutha, to whom we pray.

There are few aspects of the cosmetic industry in which McGrath doesn’t excel. She has had a hand in creating some of the best-selling cosmetics in existence, from Giorgio Armani Luminous Silk Foundation to Diorshow Mascara, while painting directly on the future’s face. In the bare-faced 90s, Pat said: Let there be yellow eyebrows. Before “Euphoria” makeup, she gave us euphoria makeup. It was inevitable that her own cosmetics line would upend the industry when it arrived. And when Pat McGrath Labs debuted, at Paris Fashion Week in 2015, it was both Patly impractical — a gold pigment which foiled on skin with a melty mixing medium — and clearly ahead of its time.

Recently, McGrath went viral again. John Galliano’s Margiela couture show in Paris was roundly applauded for almost every aspect of its production, which featured ghostly dolls haunting under a bridge. But it was McGrath’s makeup, which shellacked each model’s painted face in a shell of pure gloss, which was singled out for some of the most rapturous praise.

There was a brief and breathless craze. For days, my Instagram feed was an interminable scroll of endless angles of Gwendoline Christie sauntering, with a tulle body and plastic face. I sent it to a friend and asked: “Liquid latex???” She responded: “Or new Pat prod?” with the preening eyes emoji. After the show, tutorials on TikTok threatening to lay bare the #margielamakeup look were viewed almost 50 million times.

Nobody expected a beauty story to dominate the couture season, especially not beauty editors, who have seen a slow waning of interest in runway beauty stories, and apparently not Pat McGrath Labs, who seem like they really didn’t see her big moment coming, either.

When McGrath announced that Pat McGrath Labs had scheduled a Live masterclass amid the social media moment, it was as clear as glass skin that a new product was forthcoming. “I even have a surprise or two!” said McGrath. During the Live, McGrath revealed that the look had been less of a hero product and more a science project, the result of some off-label theatrical glam (Illustrator Clear Gloss, plus a few peel off masks, distilled water, and an airbrush gun). Her audience was grateful — we are always grateful to Mother — but it was possible to hear a quiet murmur of disappointment: so, wait… no Pat McGrath Labs Face Gloss?

Not too long ago, people were interested in what was happening on the runway above the neckline. Big beauty sponsors like Maybelline used to hide next-season launches in the kits of their key artists, hoping that a cruising beauty editor might notice. They’d also invite a certain number of press backstage to interview those artists.

I have done a few of these, and it has almost always been a demoralising experience. Fashion Week can be glamorous and even fun if you’re invited to attend it, and it can be backbreaking and even worse to work in the heat of it. It can be a third and empty thing to swoop in and out on behalf of a makeup sponsor. Certainly a great deal of artistry is occuring at these events, and it’s possible to bask in that glow for a moment, until you realise that you are probably in the way of it.

What’s worse was a feeling that, even when we got into the great show, even when we got the great interview with the great beauty tip, the beauty-loving population had already ceased to care; they saw it on an Instagram video and have moved on.

This season has already seen some newfangled approaches to beauty marketing. Perhaps in an effort to cut down on backstage press traffic, MAC hosted a masterclass with the artist Terry Barber on Zoom, where he explained a few salient trends of the season — pearl skin, blue eyeshadow, and “naughty” shades of cranberry. Dyson launched its hairdryer spontaneously, and conspicuously, on the first day of the shows in New York. It’s called the Supersonic r because it looks like a purple lowercase r. “These just showed up,” my hairstylist at Spoke and Weal told me, turning it over in her palm.

So you will have to forgive me for seeing Gwendolyn Christine and smelling, as I am trained to do, some savvy marketing. We may yet see a glass skin product in the works — and after the public response to Margiela, one can only assume that a launch calendar was reshuffled. But for now, it seems that what we have witnessed is merely some Pat McGrath-brand artistic genius, and not the kind you can buy. All the more beautiful, I think. Fashion Week is as much about art as it is commerce, the two as often in harmony as they are in discord, but still; it’s nice to notice fewer billboards in the museum.