Buy-Now-Pay-Later (BNPL) schemes have recently come under scrutiny from consumer watchdog Which?, who are calling for stricter regulations to protect online shoppers. Which? conducted research and discovered that many users of BNPL do not fully comprehend the concept of taking on debt, which raises concerns about their understanding of the associated risks. Nevertheless, Payl8r, a prominent BNPL company, asserts that BNPL is being sensationalized and insists that it is a popular and viable long-term payment option. Samantha Fogerty, the managing director at Payl8r, believes that customers should have the option to spread payments and make purchases without feeling guilt, as long as the necessary controls are in place.
In recent years, the popularity of BNPL has skyrocketed, with Klarna leading the way as the largest provider, boasting 13 million customers in the UK alone. However, the research conducted by Which? suggests that many users do not perceive BNPL as a form of credit. This lack of awareness could inadvertently expose individuals to risks such as late fees and negative credit reports. Instead, users tend to view BNPL as a convenient method of payment or a tool for managing their finances, rather than a source of credit. The quick and easy checkout process contributes to this misunderstanding, as it doesn’t feel like entering into a credit agreement. Additionally, users often fail to engage with the terms and conditions of BNPL providers, either quickly scanning through them or simply ticking a box to confirm that they have been read.
The lack of understanding surrounding BNPL products is particularly concerning because previous research by Which? has indicated that people are more inclined to use BNPL during periods of stress or financial difficulty. Instances such as missing a credit repayment, experiencing major life events, or facing financial hardships increase the likelihood of individuals turning to BNPL. Which? emphasizes the urgent need for key information, such as payment terms, late fees, and the consequences of missed payments, to be clearly communicated at the point of transaction. They argue that BNPL providers should take a proactive stance in making their terms and conditions more accessible, rather than waiting for regulations to be imposed.
Rocio Concha, the Director of Policy and Advocacy at Which?, emphatically asserts that stronger safeguards are essential to protect consumers and to educate them about the risks associated with using BNPL services. On the other hand, Samantha Fogerty from Payl8r highlights the fact that BNPL is primarily designed for low-value purchases and loans under £100. Payl8r, having become one of the first regulated BNPL firms in the UK since its launch in 2016, fully supports the industry’s call for regulation and the implementation of stronger safeguards. They firmly believe in giving customers the option to spread payments for various purposes, including buying clothes, traveling, or investing in training courses for future employment.
Useful links:
– Which? – Guide to Buy-Now-Pay-Later, including the risks
– Payl8r – Official Website
