Major retailers bombard online shoppers with Buy Now Pay Later

Online shoppers are being bombarded with Buy Now Pay Later (BNPL) payment options at the checkout, often with little or no information about late fees, credit checks and the risk of falling into debt, a Which? investigation of more than 100 major retailers has found.

Which? looked at 111 of the biggest online retailers in fashion, baby and child, and homewares to find out how they present BNPL as shoppers browse a site and make a purchase. These sectors were of particular interest as previous research from the consumer champion found that experiencing a major life event – such as having a baby or moving home – increases the odds of using BNPL by around a third.

BNPL products are rapidly rising in popularity, offering convenience to shoppers at the checkout by allowing them to pay for items in 30 days or weekly instalments, interest free.

More than half (62 out of 111) of the online retailers Which? analysed offered at least one BNPL scheme at the checkout, and nearly 70 per cent of those that offered a pay later service had more than one option available. JD Sports offered the most schemes, listing six options at the checkout including Klarna pay in 30 days, Klarna pay in 3, Clearpay, Laybuy, Openpay and Zip.

Of the retailers that offered BNPL, nearly nine in 10 (87%) promoted the schemes on their product pages, while three in 10 (30%) featured ads for BNPL on their homepages. An expert in Marketing and Behavioural Sciences told Which? these promotions can encourage shoppers to buy more and that reframing a large expense as a small daily or monthly expense can distort how we understand the cost of a product.

Which? found nine retailers, the majority of which sell baby and childrens products, that did not include any information at all about late fees on their checkout, product listing or BNPL explainer pages for certain BNPL providers. These retailers include Baby and Child Store, Bella Baby, Cosatto, Footasylum, Huggle, Kiddies Kingdom and Natural Baby Shower.

Failing to clearly communicate the risks of using a BNPL scheme could land customers with unexpected fees. It could also leave them unaware of some of the potential consequences of failing to keep up payments – which can mark your credit report, impact your credit score, or even see you referred to a debt collector.

Klarna, Laybuy and Clearpay – the three largest BNPL providers – have guidelines they share with retailers on how their products should be presented, but Which? found some retailers were not adhering to them.

At the time of the research, Klarna’s advertising guidelines said the following risk warning should always be used: “Please spend responsibility. Borrowing more than you can afford could seriously affect your financial status. Make sure you can afford your monthly repayments on time.”

However, Which? could not find this exact wording on the sites of 23 retailers including Asos, Wayfair, Halfords, Gymshark, Nike and Footasylum. Though some retailers, including Asos, used similar warnings, others only warned that missing repayments could affect your ability to use Klarna again.

Klarna has since updated the risk warning in its guidelines with different wording and is in the process of communicating this to retailers.

One online shopper told Which? he felt bombarded with different BNPL options when shopping for even relatively inexpensive items. He said: “I felt I was being pushed into using a BNPL scheme. I can see why people end up struggling. It shocks me how predominant the BNPL message is.”

Despite this, he did find himself paying with Klarna when purchasing a desk from Wayfair during lockdown: “Afterwards I thought to myself, ‘why did I bother selecting Klarna?’ It wasn’t an affordability issue – I could have paid the full amount, job done.”

After he had paid, the shopper realised he had not read the T&Cs properly and was concerned about his credit score. He added: “I suddenly wondered what it would do to my credit rating. Paying with Klarna was definitely an impulse decision when clicking through the checkout.”

The Financial Conduct Authority’s Woolard Review, published earlier this year, expressed concerns around how BNPL schemes are presented at checkouts and called for the urgent regulation of the BNPL market. However, HM Treasury plans for BNPL regulation are yet to materialise.

Which? believes there must be no further delay for the regulation of the BNPL market to ensure greater transparency on fees, credit checks and repayments on retailers’ websites so that customers who are using the schemes for the first time are clear on the risks and how they work.

Gareth Shaw, Which? Head of Money, said “While BNPL services offer convenience at the checkout, our research shows that online shoppers are being bombarded with these schemes at the biggest retailers, often with no information or warnings about the risks of late fees or getting into debt. Failing to communicate these risks could land customers with unexpected charges or impacted credit scores.”

“This demonstrates why there should be no further delay to plans for BNPL regulation, which should include much greater marketing transparency, information about the risks of missed payments and credit checks before consumers are cleared to use BNPL providers.”

Separately, Klarna has announced it is extending its services, including offering the choice of paying for items in full, immediately. It said the pay now option and other changes it was making would give customers more clarity and control.

Sebastian Siemiatkowski, Klarna’s Co-founder and CEO said: “We firmly believe that most of the time, people should pay with the money they have, but there are certain times where credit makes sense. In those cases, our BNPL products offer a sustainable and no cost healthy form of credit – and a much needed alternative to high cost credit cards. The changes we are announcing today mean that consumers are fully in control of their payments whether they pay now or pay later.”