Buy now pay later (BNPL) is, perhaps, nothing new. For many years shoppers have had access to store cards that saw them purchasing goods and not having to pay until down the line. That being the case, why is there so much interest in BNPL today? The interest is because BNPL now looks a little different. It is no longer about signing up for a card in store: instead, it is about choosing a provider as you check out online and deferring your payment until later.
BNPL is big business. In 2020 alone, those who offer this service lent around £2.7 billion between them. So, what has led to such a boom in the BNPL industry? How is this working with retailers and are there any similarities with what is going on in the world of gambling and the payment methods on offer there? Let’s take a look.
What is meant by BNPL?
The term pretty much explains itself. It allows people to purchase goods but they don’t have to pay for them until a later date. This option is attractive to people who perhaps don’t want to spend a lump sum in one go: spreading payments can make a purchase more manageable at times. When shopping online, and going to checkout, it is now common to see BNPL listed as a payment method. It is getting increasingly rare to see this option lacking.
When the option is selected, the BNPL provider completes the transaction. They pay the retailer for your item and you agree to repay them over a set period of time. This could see weekly, fortnightly, or monthly payments being made until the balance has been cleared. By being effectively lent the money by BNPL providers, this means that this service is a form of credit.
The use of credit in gambling
While BNPL and the use of credit are booming in retail and other sectors, this is not the case in the world of iGaming. The UK Gambling Commission banned the use of credit cards for use in any form of gambling. Whereas once online casinos and sportsbooks had taken these, they had to withdraw this payment method and offer alternatives. The reasoning behind the credit card ban was that people were gambling with funds that they could not afford. This was leading to people going down the path of problem gambling, leading to addiction.
While online casinos were unable to offer real alternatives to credit cards, what they did do was expand the number of payment methods that they offered. Payment providers such as PayPal and Trustly began to appear at online casinos. Players found these methods both convenient and secure. This has meant that Trustly casinos have been growing in popularity alongside those that offer PayPal as a payment method.
If people decide that they want to use BNPL for a purchase, the process is a relatively simple one. You just need to select a BNPL option when it comes to checking out online. Assuming that it is the first time that you have done so, you will need to fill out an application with the BNPL provider. This just gives the provider basic personal information. It allows them to confirm your identity and to carry out a soft credit search (not one that appears to other lenders).
When you are accepted, the BNPL provider will set a credit limit that you can spend up to. This is a limit that will be hundreds of pounds and won’t run into thousands. Assuming that you manage your repayments, you can keep spending whilst you have an available balance to use. Once you have been accepted by a provider, the next time that you check out is extremely fast and simple as there is no need to complete another application.
Who are the main players in the BNPL sector?
The main providers of BNPL in the UK all offer a slightly different service. There are three that you are likely to come across at most online stores. There are times when a store will just show one provider whereas other retailers choose to partner with all of them. You will never struggle to find retailers that accept BNPL: one provider alone partners with well over 6,000 shops.
The providers that you will come across include:
Klarna
This is perhaps one of the best-known providers of BNPL services. If you select Klarna as your payment method for retail purchases, you will have the opportunity to make monthly payments. These are spread over three months are all equal amounts. There are no fees to pay and this is one of the reasons that Klarna is such a popular option. You cannot use Klarna to pay for gambling services.
Clearpay
This is another provider who you are very likely to see at the majority of online stores. With Clearpay, payments are fortnightly rather than monthly. You make four equal payments until the balance is cleared.
Laybuy
Laybuy offers users the chance to pay for their items weekly. This is ideal for people who experience weekly pay cycles rather than monthly ones.
New providers
PayPal has also entered the BNPL market and you may see its ‘Pay in 3’ option listed. Monzo has already started offering a similar service which sees it being the first bank to do so.
Are there any concerns around BNPL?
While BNPL holds great appeal, there are charities that have concerns about how providers operate and the risk that they pose to vulnerable users. The fear is that they make it too easy to access credit and for some people, this is just too tempting. People are drawn in to make purchases that they otherwise wouldn’t and are then entering a cycle of debt.
As BNPL services are so easily accessed, those using these often forget that it is still a form of credit. Missing payments can lead to reports being made to your credit file meaning that getting credit in the future will be more difficult. Charities are calling for more regulations to be introduced to ensure that people are fully aware of this and that there are some protections in place.