Monzo reveals buy now, pay later for product with limit of £ 3,000 | Monzo Bank
Monzo digital bank is positioning itself in the booming UK ‘buy now, pay later’ market and will offer its customers credit limits of up to £ 3,000.
Monzo is one of the first UK banks to jump into the fast growing but controversial BNPL industry, which is dominated by fintech companies such as industry leader Klarna and PayPal.
Monzo, who has more than 5 million customers, said he has taken the “best bits” of BNPL, credit cards, loans and overdrafts to create his Monzo Flex product, which he presents starting Thursday.
BNPL credit allows customers to stagger payments for goods such as clothing, beauty, and furniture without interest or fees – unless they don’t repay on time, in which case some businesses will charge a fee. delay.
Invitations to use this payment method have become more common as online shoppers checkout, and companies are starting to offer more services that allow people to pay for items this way when shopping in person. .
BNPL usage skyrocketed in 2020, reaching £ 2.7bn in transactions, according to official data, and it has been estimated that between 5m and over 10m UK consumers have used this type of loan last year.
Monzo Flex can be used for online and in-person purchases over £ 30 and, like Klarna, will allow people to pay off what they owe in three installments and pay nothing more. It’s called “Pay in three for free”. The slogan “Pay in three” is also used by Klarna and PayPal.
Customers can also choose to pay in six and 12 installments, but with these options they pay interest at 19% APR.
The bank said it would offer customers pre-approved credit at checkout – up to an approved limit of £ 3,000 – after a ‘full affordability assessment’. It will also allow people to use Flex to pay for something up to 14 days after purchasing it.
Customers can pay extra or in advance at no charge and, like some other BNPL providers, there are no late payment charges. PayPal, which launched its BNPL service in the UK in October 2020, recently announced that it is removing late fees from its BNPL products around the world for all new transactions from October 1 of this year.
Ministers and regulators have already expressed concern that with BNPL buyers can make multiple deals with different providers, so it would be relatively easy to rack up around £ 1,000 in debt than benchmark agencies credit and traditional lenders can not see. However, Monzo said that as a regulated bank, it reports to credit reference agencies, so other lenders can see that a customer is using Flex.
In February this year, the government announced that BNPL would be regulated by the Financial Conduct Authority to protect consumers after a review found there was “potential for harm.”
This means that suppliers will be subject to FCA rules and will need to perform affordability checks before lending and ensure customers are treated fairly, especially those who are vulnerable or have difficulty repaying.