‘Buy Now, Pay Later’ - Red hot now…red hot later?

published on 23 September 2021

Have you ever seen a product that you really liked, but it’s two days before payday and you still have a few bills left to pay so can’t justify buying it at that moment? That’s when it’s handy to have the ‘Buy Now, Pay Later’ (BNPL) schemes. Originally, monthly payment plans were only used on big ticket items such as furniture, cars or technology. Today, however,  many online stores and high street shops offer a BNPL method of payment and more are adding to the list. 

The newest member of the BNPL team is Amazon. They’ve recently announced they will introduce a BNPL option to US Amazon users on some of their products. Amazon has teamed up with Affirm - also used by Peloton and Walmart - to allow this to happen. Affirm’s shares increased by 48% due to the news of the partnership, adding more than $8 billion to its market capitalisation. 

Eric Morse, Senior Vice President of Sales at Affirm stated, “By partnering with Amazon we’re bringing the transparency, predictability and affordability that Affirm provides today to the millions of people who shop on Amazon.com in the U.S. Offering Affirm’s alternative to credit cards also delivers more of the payment choice and flexibility consumers on Amazon want”. Additionally, PayPal has acquired Japanese BNPL company Paidy for roughly $2.7 billion. The BNPL market is red hot!

BNPL schemes in the UK have risen as well with its growing rate of 39% per year. Thanks to its popularity among online shoppers, the market swelled to £2.7bn last year. Almost 4 in 10 Brits say they have used NBPL service and 52% of these people used it more during the COVID-19 pandemic. 

You’ve probably heard of Afterpay and Affirm, but the most popular BNPL app is Klarna, with 460,000 active monthly users (July 2020). Klarna provides BNPL for a lot of UK retailers such as H&M, Topshop, ASOS, Made.com, Gymshark, Schuh, River Island, Halfords, Expedia and many, many more. Recently, BooHoo was highlighted for showing four different instalments options for one £30 dress. The fast-fashion online retailer claims that, “Like virtually every other retailer in the UK, our website offers a range of payment options to suit the needs of our customers.”

BNPL is an easy, convenient and definitely a preferred method of payment for those under-30s and tight-pocketed people right now. Especially with millennials as 54% of them use this payment method the most. 

However, with ‘Buy Now, Pay Later’ services comes late payments, missed payments and potentially the worst - debt collectors. These services can lead people down a rabbit hole of buying and not being able to pay due to not being protected by Financial Conduct Authority (FCA) regulation.

Sue Anderson of the debt charity StepChange said: “Buy now, pay later services don’t give individuals enough time or protection to stop, pause and understand the consequences of their purchase. Sometimes this even means people end up using BNPL at the online checkout without actually realising they have signed up. Second, affordability checks are only used by some BNPL lenders, and protections against taking out multiple BNPL loans are lacking.” 

“I hope the new BNPL regulation will include checks on a customer’s ability to repay if they are taking instalment plans,” says Jason Wassell, Chief Executive of the Consumer Credit Trade Association.

Have you ever used a BNPL service? Do you think every retailer will eventually offer this service? Let us know what you think on Twitter @goldlistapp

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