DoorDash will soon let U.S. users eat now and pay in installments

DoorDash users can soon pay in installments because of a new deal with Klarna. (Yuki Iwamura/Bloomberg via Getty Images via CNN Newsource)

NEW YORK CITY — Buy Now, Pay Later services are typically used on large purchases, like furniture. But now one service is branching out into fast food.

DoorDash is partnering with Klarna, a financial company that lets customers schedule small payments over a set period of time, in a new partnership announced Thursday.

When the option launches “soon,” DoorDash users can use Klarna to pay in four, interest-free payments or defer payments and let people pick a “date that aligns with their paycheck schedules,” according to a press release.

Buy Now, Pay Later (BNPL) services, which also include Affirm and Apple, have exploded over the past few years. However, many economists and consumer advocates say the widespread use of these services, plus a lack of transparency and little regulatory oversight, leaves them wondering just how much debt Americans are actually getting into.

During last year’s holiday shopping season, Adobe said that BNPL usage “hit an all-time high,” raking in more than US$18 billion in online spending — growing nearly 10 per cent compared to the same time period a year earlier. The option is particularly attractive to younger, cash-strapped consumers who are looking to make their paycheck stretch further.

To make money, the BNPL providers charge merchants between 1.5 per cent to seven per cent of the transaction price, according to Kansas City Federal Reserve research. For some retailers, the costs are worth it, according to research from RBC Capital Markets, which showed online BNPL offerings boosted average ticket sales by 30 per cent to 50 per cent and increase the share of customers who ultimately made a purchase.

Americans have found themselves in more and more debt recently. In the fourth quarter of last year, overall debt levels increased by 0.5 per cent to $18.04 trillion, according to the Quarterly Report on Household Debt and Credit, a report from the Federal Reserve Bank of New York.

That report also found that the share of households becoming seriously delinquent (a missed payment for 90+ days) on their auto loans and credit cards is at 14-year highs.

The partnership with DoorDash comes as Klarna continues to expands its offerings ahead of going public with plans to list on the New York Stock Exchange in the coming weeks. The Swedish fintech company reported last week a 24 per cent surge in 2024 revenue, cashing in on the BNPL craze, which is projected to surpass $160 billion over the next seven years.

In addition to food delivery, DoorDash also lets people buy large ticket items through third-party merchants, like Best Buy and the Home Depot.

Jordan Valinsky, CNN