Concern over buy it now, pay later deals as Amazon launches new payment system
Millions of shoppers are signing up to finance deals without realizing they are going into debt, a consumer body has warned.
Which? called for stricter safeguards to regulate buy-it-now, pay-later (BNL) offers, which allow buyers to delay paying for an item without interest or fees – unless you don’t pay it back on time .
Payment terms are particularly attractive to those under 30, and Amazon’s recent entry into the BNPL market has opened up the possibility for millions more people who might be tempted to spread the cost of their purchases.
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Amazon’s partnership with Barclays Bank differs from other BNPL providers as it is already fully regulated by the Financial Conduct Authority (FCA) – but it has an APR cost of 10.9%, although the online giant has said that promotional rates and interest-free financing may be available at times.
Currently, the industry is dominated by three main players, Klarna, Clearplay and Laybuy – Klarna being the biggest with over 13 million shoppers spending £2.7 billion a year in the UK.
Paypal also offers a similar offer to certain customers with its Pay in 3 option, although Paypal is also regulated by the FSA, which means that customers can ultimately seek redress from the financial ombudsman if something goes wrong.
The link between Barclays and Amazon, called, installments by Barclays, is seen by some as an early sign that banks are ready to offer BNPL services, with others likely to follow suit.
Andrew Hagger, personal finance expert and founder of Moneycomms, said: “I think the big banks want a piece of the BNPL action and fight against Klarna, who will have taken a fair share of their business over the past two years. .
“The deal with Barclays is like having an online Amazon store card with a pre-agreed interest rate and credit limit.
“We could see similar tie-ups next year as BNPL appears to be a growing threat to established credit card companies.”
Although BNPL is a form of credit, it works differently from more traditional methods of borrowing such as credit cards. For example, not all BNPL systems perform “rigorous” credit checks, where a full search of a person’s credit report is performed.
In response to concerns, the government announced last February that the BNPL would be regulated by the Financial Conduct Authority, although the rules are not expected to come into force until the end of this year or in 2023. A Treasury consultation, which will ends Thursday, January 6, will be followed by an FCA consultation.
In the meantime, according to the consumer organization Which?
He said many of the BNPL users he interviewed did not view these transactions as a form of credit – instead, they described them as a “means of payment” or a “money management tool.” silver”.
Rocio Concha, Director of Policy and Advocacy at Which?, said: “BPL systems can offer speed and convenience at checkout, but our research shows that many users don’t realize they are getting into debt or consider the possibility of missing payments. ”
The consumer body said that, “given the immediate risk”, BNPL firms should make their terms and conditions more accessible now. He added that affordability assessments should be carried out for all transactions before the regulations are introduced.
Spending by these payment methods more than tripled between January and December last year.
And a record 28% of Britons made at least one BNPL refund last October, according to Equifax, up from 23% previously.
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