‘Buy now, pay later’ is 200 years old concept

Everything old is new again. Witness fintech giant Square’s recent acquisition of Afterpay, a company that enables consumers to buy now and pay later via regular payments administered by the Australia-based company.
Afterpay appeals to young millennials eager to move beyond conventional forms of financing such as credit cards. This may seem cutting edge to the youngsters, but it’s nothing but a reboot of a credit system their great-great grandparents knew and loved: the installment plan.
Imagine, for a moment, a world without credit cards and other familiar forms of consumer financing. If someone two centuries ago wanted to purchase a big-ticket item such as a plow or cart, they had to front the full purchase price or borrow from family and friends.
That started to change in the early 19th century. According to historian Lendol Calder, the first forms of installment credit appeared in the US at that time when a furniture dealer in New York City began selling goods this way.
The first installment plans, like most that followed, rested on a legal foundation that structured them as a formal contract. When a buyer failed to make a payment, the seller could repossess the goods. Eventually, courts also permitted sellers to retain whatever payments had been made.
But installment plans remained unusual until the middle of the 19th century, when a growing number of essential — and expensive — consumer goods came into the market. These included mechanical reapers like the ones invented and marketed by Cyrus McCormick. Even the cheapest such machine was well
beyond the price range of the average farmer. But their appeal was
obvious: they cut harvesting time
by 95%.
It was the sewing machine that turned the installment plan into a popular form of credit. In the 1850s, a number of companies began marketing sewing machines to consumers, especially housewives. These time-saving inventions cost well over $5,000 in today’s dollars, far beyond the means of the middle-class families that wanted them. Unlike a reaper, which might pay for itself in one season, sewing machines required many more payments stretched out over months or years.
The genius behind the new credit system was the Singer Company’s Edward Clark, who first asked in 1856, “Why not rent a sewing machine to the housewife and apply the rental fee to the cost of the machine?” He apparently took inspiration from piano manufactures in New York City, who had introduced a similar concept at the time.
Singer’s credit system transformed the company’s fortunes. Within a year, sales tripled, and within a decade, Singer had blown past all competitors, largely because it had devised a new method of financing that eventually demanded a mere dollar a week from prospective buyers.
By the end of the century, specialised retailers — so-called “installment houses” — had become ubiquitous in the nation’s cities. They offered a wide range of household goods on credit: furniture, bedding, dishes, even clothing.

—Bloomberg