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Published
Jan 6, 2022
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Payl8r defends BNPL as Which? calls for more regulation

Published
Jan 6, 2022

​Buy-Now-Pay-Later (BNPL) schemes have been criticised by Which? with the UK consumer body calling for stronger safeguards to stop online shoppers from choosing such loans to pay for products “without knowing the risks”.

Photo: Pexels


New research from the body claims many people do not think they are taking on debt when using this payment method. Its research, involving in-depth interviews with 30 ‘typical’ BNPL users, “raises concerns that shoppers do not fully understand the risks of choosing a 'pay later' option at the checkout”.

However, one such company, Payl8r, said it is “concerned BNPL is becoming sensationalised” and that such schemes are “very much here to stay”.

Samantha Fogerty, managing director at Payl8r, said: “If the right controls are in place, there’s no reason why customers shouldn’t have the option to spread payments and make guilt-free purchases.” 

The report noted that BNPL has soared in popularity in recent years as a way for consumers to pay for goods and services, with the biggest provider, Klarna, now boasting 13 million customers in the UK.

But the Which? research claims many of the BNPL system users interviewed did not think of these schemes as a form of credit, “meaning they could unwittingly be exposing themselves to serious risks of missing repayments, such as late fees, marked credit reports or referral to a debt collector.”

Instead, participants described the schemes as a ‘way to pay’ or a ‘money management tool’, rather than a credit provider. One user said: “It allows payments to be spread out for budgeting. It made things possible which in one go would have been extremely difficult and I would have probably had to borrow money from elsewhere."

Which? research also found it was the speed and simplicity when selecting BNPL at the checkout that contributed to users’ misunderstanding. Another user said: “It seems really convenient and no hassle. It just asks a few questions so it doesn’t feel like you’re committing to a credit agreement.”

The research also revealed low engagement with BNPL providers’ terms and conditions. Most BNPL users said they either skimmed the T&Cs or simply ticked a box to say they had read them in full.

As a result, some users had a limited understanding of the consequences of missing payments, and the safeguards and checks carried out by BNPL providers. Some participants were not aware there were late payment fees at all.

And many of the participants wrongly assumed the schemes were regulated.

This lack of understanding around BNPL products is particularly concerning given previous Which? research that found people are more likely to be using BNPL at stressful and challenging times in their lives.

Missing a credit repayment or bill or experiencing a major life event – such as getting married, having a baby, moving home or being made redundant – increases the odds of using BNPL by around a third (38% and 35%, respectively).

“Key information, such as payment terms, late fees and the potential consequences of missed payments, should be communicated at the point of transaction to help consumers make informed choices”, said Which? “Given the immediate risk, BNPL providers should proactively make their key terms and conditions more accessible, rather than waiting for regulation,” it added.

Rocio Concha, Which? director of Policy and Advocacy, said: “Many users do not realise they are taking on debt or consider the prospect of missing payments. That is why there must be stronger safeguards to protect consumers and warn about the risks of using the schemes.”

But Payl8r’s Samantha Fogerty also added: “Let’s not forget, BNPL is for low-value purchases and loans are often under £100. For Payl8r it’s all about giving our customers freedom with the right controls in place. 

“We were the first BNPL firm in the UK and have been regulated since we launched in 2016. In fact, we’re one of only two regulated lenders in the BNPL space. We back calls for the industry to be regulated and with stronger safeguards, as we are massive advocates of giving customers the option to spread payments to buy what they want or need such as clothes and travel or even investing in training courses that can help them gain future employment.”

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