PayPlan, the debt advice company, recently warned of the problems that BNPL can pose to consumers. The other element of the study found that 20 per cent of respondents felt they were not shown the terms or conditions and over half (51 per cent) believed BNPL had contributed to their increased levels of personal debt. But what is troubling is that it appears BNPL schemes are not making the financial implications clear enough, particularly when marketing to young people who are more likely to be financially vulnerable. There is nothing wrong with such finance schemes, as long as you pay them back on time and fully understand the terms and conditions. The lack of clarity on such questions reinforces concerns about how BNPL schemes market themselves to young people. Klarna declined to say what share of customer payments were over two weeks late, or what proportion had been handed over to debt collectors, except to say that both were “low”.īNPL schemes are not making the financial implications clear enough, particularly when marketing to young people who are more likely to be financially vulnerable One such “financing” product, formerly known as “Slice It”, gives payment plans from 6-36 months, undertakes hard checks and can therefore impact credit scores. When the FT pointed this out to them, Klarna replied it had said this only “to ensure responses are relevant and accurate to entire range of products”. In previous statements, however, the company had said that all of its products could impact credit scores. He added: “To date, a customer’s credit score has not been impacted by using Klarna’s ‘Pay later’ products even if they have failed to pay on time.” Luke Griffiths, general manager at Klarna UK, said that its “pay 30 days later” and “instalment” options are exempt from credit checks, so it was inaccurate to say that their scheme damaged credit scores. However the Swedish company issued a statement last week in response to the widely reported study. Klarna was not specifically cited in the Compare the Market research. As many as 2m adults, 39 per cent of whom were 25 to 34-year-olds, had damaged their credit score by using these payment schemes. Two-fifths (41 per cent) of those asked were unaware that a missed payment on BNPL would impact their credit score. Klarna, for instance, says it signs up 55,000 new customers a week.Ĭompare the Market’s research suggests there may be real financial risks to the trend. Retailers are attracted by the sales boost these services typically bring and the high sign-up rates of BNPL companies. No interest or fees are charged because retailers pay BNPL companies for their customers to be able to use the service. ![]() They offer the option to delay a payment or to split payments into instalments. ![]() Over the past few years, Klarna, alongside other schemes such as Clearpay or Laybuy, has become a popular way for impecunious millennials and Gen Zs to buy clothes. You may not have heard of BNPL - but if you have teenage or young adult children, they certainly will have. When I grabbed my phone to scope out this Love Island collection, plastered across the screen in a pink font was an advertisement for Klarna, the Sweden-based bank that offers “buy now, pay later” (BNPL) payment schemes. The retailer then markets the same garments on its app and website, allowing fans to purchase the outfits for themselves in a few clicks. Online fast-fashion retailer I Saw It First bagged this lucrative contract again, as it did last year for Love Island’s summer series.įor those of you who have managed to avoid the show, it teams up with a different fashion brand to dress contestants for the six weeks they are shacked up in the villa.
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