Checkout has become increasingly controversial as more retailers have moved from clerks scanning your items to self-checkout. Many chains have made the move — and reported increases in intentional and unintentional shoplifting.
A number of factors underlie the controversy.
For one, customers don't like stores handing them the burden of scanning their items and then checking their receipts to ensure they did it correctly. Honest people bristle at the idea of a store making them do added work and then showing clear distrust.
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Second, self-checkout has led many chains to post workers in that area to monitor customers.
Walmart workers can shut off self-checkout lanes to check on customers who may not be scanning some items. That puts front-line staff directly in the line of fire, working as security personnel even though that's not how they'd been trained.
It's a situation that has led Target (TGT) -) to limit self-checkout to a certain amount of items in some stores.
Kroger (KR) -) has also struggled with self-checkout and has tested different solutions including aggressive security personnel.
Walmart has largely gone in a different direction. It has bet big on self-checkout and has now added a controversial new payment method to its self-checkout kiosks.
Image source: John Smith/VIEWpress.
Walmart adds buy now, pay later to self-checkout
Walmart has become the first major retailer to enable customers to use a buy now, pay later service at checkout.
Amazon offers the payment method online, letting customers take credit-card-like loans where they pay for their purchases over time rather than all at once.
In Walmart's case, it has partnered with Affirm to offer buy now, pay later services at its self-checkout lanes.
"Eligible shoppers can easily pay over time for their favorite electronics, apparel, toys, and more in simple monthly payments when checking themselves out in-store," Affirm said in a news release.
Not every customer will qualify for a buy now, pay later loan, but those who do will be given options as to how long they want to spread out payments. Walmart, like Amazon, (AMZN) -) does not limit BNPL to certain items.
That means people can pay over time for any item excluding grociers or buy luxury items they can't afford.
Wlamart's BNPL loans are capped at $4,000 but not all customers will be approved to borrow that much.
Walmart walks a dangerous line
BNPL services like Affirm generally do not report to the major credit services (although Affirm does in some situations). That means Walmart customers could be adding debt that traditional credit card companies would not allow them to take on.
In an email to TheStreet sent after this story was published, Affirm clarified its policies.
"Affirm does actually report some loans and repayment activity to credit bureaus,: the company said.
The company also directed TheStreet to its FAQ page where it offers more detail.
"At this time, only some Affirm loan types are eligible to be reported to Experian,:" according to the BNPL company.
Affirm made clear that its services enable consumers to make purchases that they otherwise would have put off.
“Recent Affirm research revealed that more than half of Americans (54%) are looking for retailers to offer a buy now, pay later option at checkout. Moreover, we’ve found that 76% of consumers would either delay or not make a purchase without Affirm,” said Affirm Senior Vice President Pat Suh.
That's a plus for people who have the income to pay off the loans, but it's a dangerous setup for those who may already be stretched thin financially.
The situation essentially enables people to make both needed purchases and frivolous ones based on lending standards looser than the ones traditional credit card companies use.
The U.S. government's Office of the Comptroller of the Currency has issued a warning on BNPL loans.
"The rapidly growing availability of BNPL loans could pose risks related to consumer credit reporting," according to the agency.
Buy now, pay later loans "may not be fully captured in borrower credit histories. Many BNPL lenders use soft credit bureau inquiries to approve borrowers. Existing credit scoring systems are not designed to capture the very short-term nature and structure of BNPL loans,"
That creates a situation where people might be getting BNPL loans they can't afford to pay back.
"Incomplete reporting of BNPL loans could make it difficult for lenders to know the total dollar amount of debts and other obligations that applicants have before determining whether to approve them for new credit," the federal agency added.
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