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EconomicsELI5 How do companies like Klarna and Afterpay make money without charging interest?(self.explainlikeimfive)
I see these companies offering installment payment options for online purchases but they don't charg...
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Yes and no. Yes in that it attracts more transactions. No in that the type of people who need afterpay are spending money they can't afford and so "complaints" come up in an effort to request refunds
If it's a website, then she can try to do A/B testing where some users are offered the option of Klarna and some aren't. Would remove the effect of seasonality, and she could see if offering Klarna converted enough sales to make up for the higher fee and refund requests.
Like this small business did a similar thing just recently where users were randomly brought to one of two pages—one for a more expensive, US made product, and one for the exact same product, but cheaper and Chinese made. Then they compared how many sales each option converted to see if people really would pay more for US made stuff.
Good read, thanks.