Wimpy

I'm Buy-Now-Pay-Later Man,

I live on a credit plan.

I see it, I want it, I get it, you see,

No money? No problem, it's all so easy.

I'm Buy-Now-Pay-Later Man,

I live on a credit plan.

I'm strong to the finish, 'cause I spends me spinach,

I'm Buy-Now-Pay-Later Man.

Popeye is an American icon.  However, despite his spinach-triggered brawn, Americans tend to eat more like his buddy Wimpy.  Remember him? The, “I’ll gladly pay you Tuesday for a hamburger today” guy.  Not only have we mimicked his eating habits, but we’ve followed his footsteps in payments as well.

By now you’ve probably seen offers on various retail websites for buy now pay later.  These are firms which allow consumers to purchase wares, take possession of the goods, but pay over time.  It’s kind of like the old layaway processes, but you get to take your stuff before it has been paid in full.  Now a new method of payment has made its way onto the scene: FedNow.

As The Economist puts it in this article, “America’s financial plumbing is overdue a spot of maintenance.”  We are currently operating in a system which was designed to replace paper checks, but technology has advanced greatly since even I was a bank teller at the turn of this century.  Other nations have more sophisticated processing, including some developing countries.

Our central bank (perhaps feeling threatened by blockchain technology) created a centralized instant-payments system.  This new system will let users send money directly from their preferred financial institution to those people or firms demanding payment without the delays typically associated with processing.  The Federal Reserve is hoping they’ve created a better mousetrap for transferring funds, one which can be used to pay back a friend for a cup of coffee, large one-time purchases, or ongoing payments like installment loans.

Not all big banks are on board yet (just two according to The Economist).  Instead, these laggards benefit from the delay in the current system because they are able to earn interest on the float, funds which haven’t yet been transferred out.  Like the craving for a good burger, their desire for this revenue source will be hard to kick.  Of course, Americans may not be so keen on giving up their pay-later predilections either, so time will tell how much spinach will be spent in real time.