Monzo launches BNPL product

17th September 2021

Monzo is to launch a buy now, pay later product called Flex that will let customers borrow up to £3,000 and spread the cost of purchases over three, six or 12 months.

The digital bank said those who repay over three months will be charged no interest, while those spreading costs over six or 12 months will be charged 19% annual interest. Flex can be use on any transaction over £30 and can be retroactively applied up to two weeks after a purchase is made. Monzo will not issue charge late fees for customers who miss a repayment, unlike some rivals. The bank noted that customers will be subject to affordability assessments and credit checks.

Commenting on the launch, James Andrews, Senior Personal Finance Editor at said “The introduction of the new ‘Flex’ product from Monzo – which allows customers to spread the cost of purchases over 3, 6 or 12 months – has the opportunity to change consumer attitudes towards BNPL providers and highlight the potential financial consequences of spending now and worrying about it later.”

“Putting affordability assessments and credit checks in place could lead to potential repercussions if payments are late or missed; but showing that this is possible to do also means that other BNPL providers will struggle to argue that this kind of transparency isn’t possible.”

“The extent to which the current industry giants will feel the impact of ‘Flex’ could be limited. Consumers often turn to BNPL providers due to the convenience at points of sale and Monzo would therefore need to tempt customers and retailers away from existing BNPL providers.”

“When it comes to the question of whether other regulated banks will follow suit with BNPL offerings, that still remains to be seen. The business model of BNPL is something that will certainly interest major banks. Competitors will not want to miss out on revenue they could be earning or lose profitable customers to banks offering new ways of paying.”

“Ultimately, this move is a large-scale test of what happens when a regulated financial service provider launches BNPL with credit and affordability checks in place. How well it does, or doesn’t do, and the problems Monzo faces in the next few months could provide a regulation template for others.”