Everything you need to know about the buy now, pay later system in the UK 

Imagine this: you are sitting at home, you are on your computer, looking at clothes to buy, but you get upset because your bank statement is going through a crisis, so you turn off your computer and try not to think about it. Well, guess what? There is a new way of buying anything you want and paying for it later. 

Digital banking has been on the rise in the past years and with the development of technology, we are able to access any service we want from the Internet with just a click. From ordering food to paying bills to online-shopping, banks have come up with a new way to purchase something whenever you want and pay for it 30, 60, or even 90 days later. You can complete an order in just a couple of seconds and decide on a payment schedule. It all depends on you and your finances.

How does it work? 

The “buy now, pay later” is one of the latest methods of purchasing that is taking a rise in the UK. People who are going through financial crisis use it to buy the necessary goods or get the services they need without paying right away. Customers can shop anything they want from catalogues that have this feature. Some sellers even offer buy now pay later catalogues without a credit check which is absolutely convenient for customers. Retailers even allow their customers to decide whether they want to pay every month or in instalments so they do not have to pay a large amount all at once. Once a purchase has been done, customers receive a billing statement depending on how they chose to pay. As part of this billing statement, there is the list of all the goods purchased, which resembles a typical fiscal bill, as well as the total amount paid so far and the date of the next payment. 

The pros and cons of BNPL 

However, it’s not all sunshine and rainbows. There are still some advantages and disadvantages to the “Buy now, pay later” system. In order for you to get the whole picture, we are going to elaborate on the pros and cons of this system below. 

As it was mentioned earlier, the biggest advantage of BNPL is that customers can literally buy anything they want at the moment and decide when they wish to pay. Also, there is the customers’ decision on how they wish to pay, monthly, or in instalments. 

In addition, retailers offer customers to purchase little things, which are up to $2000 and big things, which are up to $30,000, depending on their needs. However, this can lead to some issues. Let’s take a look at some of them.

Let’s say you want to redecorate your living room and you need a sofa, a club table and a lamp which cost about $10,000 in total. You choose to pay in instalments. However, you forget to pay an instalment, and what happens? You get charged with a fee for late payment. These can soon add up and you are then faced with a financial crisis on your hands. This is the biggest disadvantage of this method. 

Another drawback is that you may get carried away with these purchases. This can lead to either late payments or fees and again you may be struggling to keep up with your commitment to the retailers. 

How does BNPL affect people?

Using this method can cause a lot of debt to people. Students, for example, could get very much carried away with purchasing all kinds of services which could lead to borrowing money from family and friends or even spending their student loans to pay off a debt. It may be all fun and games when you are buying clothes and shoes or arranging a weekend away, but when the billing statement arrives in the mail it does cause some stress, problems with personal relationships, or with your overall financial situation.

However, Ricky Knox, the founder of Tandem, another digital bank, had a different opinion about this. He claims that by using this method of “buy now, pay later”, people are actually getting more responsible with how they are spending their money.  

What are some “buy now, pay later” platforms?

There are some major BNPL platforms you should know about. These are the biggest players that offer the “buy now, pay later” service. 

Klarna 

Klarna, which was launched in 2014, is a Swedish platform that provides online financial services and post-purchase payments. It consists of about 85 million users out of which 6 million are UK customers. They have at least 205,000 online merchants, including some of the most famous brands from clothing lines to electronics. Some major brands that support this platform include TopShop, Boohoo, Nasty Gal and many others. The minimum period for post-purchase payments is 30 days and customers are offered an option to pay in instalments. 

Laybuy

Laybuy (New Zealand) is a platform launched in the UK in 2019. It includes more than 800,000 retailers and it allows customers to pay in six instalments without interest. If customers do not pay on time, then there is a £6 fee after 24 hours and then again after seven days. Some major brands that support this platform are Bed Bath & Beyond, Forever Now, ToyCo and many more. 

ClearPay

ClearPay was launched in the UK in 2019. It includes more than 500,000 members and it functions similarly to Laybuy with the charged fee for a late instalment. Some major brands that support this platform are Holy Grail Beauty, Bali Body, ASOS and many more.

Final words 

However you decide to pay for your purchases, you need to keep in mind your financial situation before you actually purchase. You need to be able to afford what you buy and also be able to pay back what you owe.

The editorial unit