Mounting concerns over consumer debts, most notably those of younger shoppers, could mean buy now, pay later firms are set to face more regulations following a review of their services.
Many major retailers give consumers the option to split payments using by now, pay later services, with the convenience of instant approval and interest-free installments being the main appeal for many shoppers.
However, the Financial Conduct Authority (FCA) is concerned that it is possible to rack up unseen debts of £1000. Consumer use of the buy now, pay later system has increased dramatically in the last twelve months, with five million people making use of the service.
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UK sales amounting to £2.7bn have been accumulated over the last year, despite the FCA finding that one in 10 people using pay now, pay later already had existing debt arrears elsewhere.
The FCA has now completed an extensive review of buy now, pay later credit services and is proposing increased regulations as a result.
For many the buy now, pay later service offered by the likes of Klarna, Clearpay and LayBuy provides a handy way to get items they want sooner. It allows customers to choose the option at checkout, either online or in-store with more relaxed checks than other financial services. Some variants of the buy now, pay later model allow shoppers to defer payments for up to 30 days.
Consumers use of buy now, pay later has accelerated since the emergence of the coronavirus pandemic, with an estimated £4 in every £100 now being attributed to this form of payment.
While the glossy marketing is appealing to consumers, particularly younger shoppers, buy now, pay later providers currently fall outside regulations that cover credit providers including credit card and loan companies.
Stricter regulations implemented by the FCA may ultimately benefit the customer. It could mean that consumers will eventually be able to take a financial complaint about a pay now, pay later company to the financial ombudsman, which isn’t possible currently.
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Rob Clymo has been a tech journalist for more years than he can actually remember, having started out in the wacky world of print magazines before discovering the power of the internet. Since he's been all-digital he has run the Innovation channel during a few years at Microsoft as well as turning out regular news, reviews, features and other content for the likes of TechRadar, TechRadar Pro, Tom's Guide, Fit&Well, Gizmodo, Shortlist, Automotive Interiors World, Automotive Testing Technology International, Future of Transportation and Electric & Hybrid Vehicle Technology International. In the rare moments he's not working he's usually out and about on one of numerous e-bikes in his collection.