Buy Now, Pay Later: the dark side of credit schemes

It is estimated that £4 in every £100 spent in the UK is now carried out via a buy now, pay later scheme and it’s not difficult to understand why. The quick and easy checkout process is, of course, incredibly convenient. For those unable to pay large sums upfront it is a way of making necessary purchases manageable. The Klarna app lets you track when instalments are due, allows you to ‘snooze’ payments if you need a little longer to pay, and lets you pay off purchases early if you have the funds. Gary Rohloff, the co-founded of LayBuy, told the BBC that the company had “had families write to us thanking us for being able to afford raincoats at the start of winter because they couldn’t afford to buy coats in one hit but can afford smaller payments over six weeks”. Cases such as these are endless: students needing to buy laptops for the move to online learning, but lacking the credit score needed to apply for a credit card to cover the cost; first-time buyers putting all their available funds into a deposit but not having the immediate cash needed to buy furniture; families with children growing out of expensive school-shoes unable to meet the expense of multiple pairs in one hit.

The schemes are a blessing for many, but they also make the shopping process painless for those wanting to buy multiple sizes to try before they buy: store-credit allows them to delay potential payment and prevent large sums coming out of their account before they are sure which items they want to keep, and which they want to return. The accompanying apps for the various schemes are friendly, welcoming, understanding; framing themselves as a helpful aid to the modern culture of online shopping, apparently a far cry from the dangerous slippery slope of credit cards, credit scores and high-interest payday loans. Both consumers and retailers benefit from this set-up: with consumers more likely to commit to purchases under the comfort of the scheme and the promised safety of the 30-days to pay, retailers enjoy more sales.

And yet there is a rather obvious darker side to the effortlessness of purchase which these schemes and the retailers who offer them put at the forefront of their marketing. By magicking away the true cost of transactions by encouraging shoppers to buy everything they want now, only to think about it later, the schemes coax consumers into making purchases without careful consideration, purchases which are, on average, higher than purchases carried out without the use of credit schemes. The joy of getting an item now, an item we may have previously thought out of our budget, overshadows the contractual obligation to pay for that very item later down the line. The cool, millennial pink of the Klarna app seems to belie the brute fact that it is a company that profits from the debt of others. By luring young people into its vision of cool – its performative, zeitgeisty understanding of millennials’ desire to purchase the latest trends and keep up with influencer culture – it encourages purchases from a group of people with statistically lower incomes and introduces them to credit in a way that normalises the purchasing of items you cannot immediately afford. 

These schemes, then, make it easy to quickly fall into debt, a debt that, until recently, would not be picked up by credit reference agencies and other lenders. Owing to the increased use of buy now, pay later schemes in recent months, used by many to fund pandemic-induced shopping habits, it was announced in early February that the FCA (Financial Conduct Authority) would subject firms like Klarna to stricter regulations. Affordability checks and better support for those more vulnerable or struggling to repay would be introduced as soon as possible, preventing shoppers who are already dealing with debt arrears elsewhere from slipping through the cracks.

The promise of new legislation is a step in the right direction. By preventing shoppers from committing to purchases their budgets cannot realistically accommodate, it stops the firms from exploiting vulnerable buyers. But what of the dangerously chic marketing these firms rely on to lure buyers in? The modish pink of the Klarna app; the sweet, pastel, mint green of Clearpay; the luxe purple of LayBuy? The apps don’t seem out of place on our home screens, blending effortlessly, seamlessly into the fabric of modern life. On Asos, the various ways to pay via buy now, pay later schemes are often advertised on their home page, front and centre, as if they were not slippery slopes towards debt but quick, easy, seemingly harmless ways of keeping up with the example set by social media influencers and the importance of conspicuous consumption online.

Constantly purchasing via credit so that you are effectively living in debt has become scarily normal, somewhat glamorous, and framed as risk-free before our very eyes. If we want to truly regulate these firms, we need to, rather like the ASA (Advertising Standards Authority) restrictions placed on the advertising of alcohol and tobacco, monitor and police their marketing tactics too.

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Imogen Carter De Jong

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September 2021
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