NEW YORK/LONDON/MILAN/MELBOURNE (Reuters Breakingviews) – Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.
– Macyâs and Klarna
– UK companies and debt
TAKEAWAY. The Great Depression popularized layaway plans, where shoppers paid for items in installments and then took them home when paid in full. The pandemic is universalizing the reverse â and Macyâs wants in. The $2 billion retailer is joining the likes of Silver Lake and Snoop Dogg and investing in Klarna, the Swedish payments group, and under a five-year partnership, customers can pay in four interest-free installments after purchase.
Nearly a century may separate the two financing inventions, but the consumer impetus is the same. Consumersâ wallets are shrinking, and they are looking to spread out payments. Likewise, retailers are desperate for sales, and buy-now-pay-later plans do that in exchange for giving away a cut. So far, everyone is happy, especially Klarna, which was valued at nearly $11 billion in a September funding round.
But unlike layaway plans, which forced customers to be thrifty by forgoing consumption until the item was paid for, these plans encourage immediate gratification. A harder recession, or regulation to protect consumers, may bite them. (By Robert Cyran)
DEBT PANDEMIC. Britainâs small and medium-sized firms are drowning in debt just as Prime Minister Boris Johnson tightens coronavirus restrictions. Data from UK Finance, a bank trade association, showed https://www.ukfinance.org.uk/data-and-research/data/business-finance/business-finance-review?utm_source=Website&utm_medium=bit.ly&utm_campaign=Business%20Finance%20Review%20Q2%202020 on Tuesday that SMEs borrowed 40 billion pounds from the seven largest lenders in the first half of 2020. Thatâs almost double the 24 billion pounds they borrowed in the whole of 2019. Government-backed schemes, like Bounce Back Loans, helped.
Given cash-strapped SMEs have already maxed out on credit as their first line of defence, new lockdowns may do more