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.”
Notes to editors
Research
- Which? looked at 111 of the biggest online retailers’
websites across the fashion, baby and child, and homewares
sectors, looking at how BNPL schemes - which allow you to pay for
items in instalments or at a later date - are presented on the
customer’s journey through to the checkout page.
- Irene Scopelliti, Professor of Marketing and Behavioural
Sciences at Bayes Business School, explained how these promotions
might encourage us to buy more. ‘The focus of these promotions is
often on the postponement of the painful act of paying, which
would normally act as an ‘inner’ self-control device,’ she told
us. ‘Consumers may focus their attention on the cost of the
monthly instalment rather than on the full price, falling into
the trap of thinking that the item is only £x per month, rather
than £x in total.’
-
‘Buy now, pay later’ not just
used by fashion-conscious young shoppers
Case studies
Dan Holden describes feeling bombarded with
different BNPL options when shopping for even low-ticket items.
‘I felt I was being pushed into using a BNPL scheme with
Wayfair,’ he told Which?. ‘I can see why people end up
struggling. It shocks me how predominant the BNPL message is.’
Despite this, Dan 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,’ he explained. After he’d paid, Dan realised he hadn’t read
the T&Cs properly and was concerned about his credit score:
‘I suddenly wondered what it would do to my credit rating. Paying
with Klarna was definitely an impulse decision when clicking
through the checkout.’
A Klarna spokesperson said: “Klarna’s BNPL payment options are
only offered on purchases over £50 on Wayfair. We apply strict
eligibility assessments on each and every purchase a customer
makes to ensure we only lend to those who can afford to pay us
back. If they miss a payment it will not impact their credit
score, however we will freeze their account to prevent them from
accumulating debt, because our business model relies on people
repaying.”
Em, in a comment on a Which? Conversation
post, shares a similar point of view and believes BNPL users
should be presented with key information before reaching the
checkout. ‘What is particularly poor is when I’ve already decided
to make a purchase, I head for the checkout and I am then
presented with the distraction of using a BNPL option to pay for
goods,’ she explained. ‘If entering into a purchase with the
intention of using BNPL, presumably in the knowledge that you
cannot afford to pay in full, it must only be offered to
registered customers that have pre-selected the option and
confirmed they have read all the terms and conditions, before
reaching the checkout.’
How to shop safely with BNPL
- Always read the T&Cs carefully before deciding which
scheme to use (and be clear on the penalties if you miss a
repayment)
- Set up alerts for payments
- Know your rights if something goes wrong with your online
order
- Make any returns promptly
Rights of reply
Asos
Asos told Which? it’s inaccurate to suggest it’s not clear enough
at each stage of the customer journey on the differences between
each scheme, or that it does not include Klarna’s recommended
risk warning on its website. It takes its responsibility to its
customers incredibly seriously and puts a lot of work into
explaining and describing the differences between payment
options.
It has detailed FAQs for each payment method (with information on
late fees, credit checks and repayments) and includes wording
encouraging customers to spend responsibly which it’s had in
place since before Klarna advised retailers to include such
wording. Where it has banners promoting a BNPL service, it always
links through to landing pages explaining more about the BNPL
scheme to ensure customers have all the information they need to
make an informed choice.
Baby and Child Store
A Baby and Child Store spokesperson said: “We have
only ever received positive feedback from customers with our
payment options, as it gives them an opportunity to spread the
cost of payments at what can be an expensive time.
“Most of the BNPL payment options appear at the top of our
website and these link to information about the various options,
we will however take on board the feedback from Which? and make
available the information from the BNPL schemes in relation to
fees.”
Clearpay
A Clearpay spokesperson said: “Clearpay enables
responsible spending and encourages transparency at the checkout
with clear guidelines and support for our retailers. Our
integration team reviews every retailer website to ensure
compliance with FSMA and FCA rules on financial promotions. A
disclaimer about late fees is clearly displayed at checkout
before a transaction is completed, and we do not report to credit
agencies so customer credit scores are not impacted through using
Clearpay.”
Clearpay told Which? it will be looking into the retailers it has
flagged concerns about to make sure the correct information is
presented.
Cosatto
Vicky Morley, Marketing Director at Cosatto,
said: “At Cosatto we aim to give our customers the
most flexible payment options to suit their needs. Buy Now, Pay
Later schemes are clearly something that our customers want. In
response to customer feedback we have extended our payment
provider options recently.
All the payment options have been added to our site after
approval and in accordance with the guidelines of each specific
provider. However, providing clarity of information to our
customers on the payment schemes is of the utmost importance to
us and is something we are already working on improving. We will
of course take your comments on board and take appropriate action
accordingly.”
JD Sports
A JD Sports spokesperson said: “We want to give our
customers a choice of payment options so that they can decide
what works best for them. We list all the options clearly with a
prominent link to all terms and conditions. We also provide
extensive information on each payment provider with all the
common FAQs and contact information should a customer have
further questions.”
Kiddies Kingdom
Mohammed Patel, CEO of Kiddies Kingdom, said: “Buy
now, pay later payment options have become extremely popular in
the past 12 months and as a business we have had little option
but to offer them to stay in line with the competition. These
payment options cost the business more to process, and
subsequently are not our preferential methods for payment.
"We signpost to the buy now, pay later payment options on each
Product page, which has links that lead to pop ups, and for more
detailed information these direct users to a detailed FAQ on the
providers website. We are in the process of launching a new
website where improvements will be made to all areas, including
user experience and communication. As a further improvement, we
will strive to provide additional clarity to shoppers on buy now,
pay later payment options, specifically with the introduction of
more detailed landing pages.”
Klarna
Alex Marsh, Head of Klarna UK, said: “Our short
term fee and interest-free Buy Now Pay Later products are a
consumer-friendly and sustainable alternative to credit cards,
which are laden with high interest rates, hidden fees, and
encourage minimum payments that cause millions to sink deeper
into debt each year. We uphold the highest standards with regards
to being transparent with our customers through straightforward
terms and conditions presented each time a customer selects
Klarna at the checkout, and by working closely with merchants to
explain our payment options either on their website or within
their stores. We provide them with clear marketing and product
guidelines so that every customer understands how our payment
options work as well as a dedicated team to ensure these
guidelines are met.”
Laybuy
Gary Rohloff, Managing Director and Co-founder of Laybuy,
said: “We welcome Which’s findings and believe it’s
important that all providers set high standards of transparency
and responsibility.
“For Laybuy, we have always made it clear that BNPL is a credit
product. That means we’re never the default payment option on our
partner retailer websites and we’re also the only BNPL provider
to conduct hard credit checks on customers. We’re here to support
customers and help them buy everyday goods in six, interest-free
instalments. We provide clear information on how the product
works on our website including information on our hardship policy
and late fees.
“We work closely with our retail partners to make sure they have
the correct information for customers who choose to pay with
Laybuy, however we are unable to strictly enforce information
displayed on a merchant’s website and it’s important customers
ensure they are happy with a merchant’s own terms and conditions
before purchasing from them.”
Natural Baby Shower
A Natural Baby Shower spokesperson said: “At
Natural Baby Shower, we are dedicated to providing a quality
online service to our customers and this includes how we can
deliver information on BNPL[schemes]. In response to your
inquiry, we launched an investigation into the information
displayed across our site for three of three BNPL schemes (two of
which are sub-schemes of one BNPL) stated by Which?;
Klarna’s Pay in 3 and Klarna’s Pay in 30 days options (both
options are interest-free and do not charge late fees) as well as
Laybuy’s Pay in 6 weeks option.
“Our investigation with Klarna revealed that the information
stated on our site complies with the onboarding guidelines
stipulated by Klarna. We currently include a static page to
outline the process of Klarna payments however at checkout, while
we agree that more information could be more convenient to the
customer, we may run the risk of this information becoming
outdated and inaccurate; we would therefore like to avoid housing
information that could misinform. We have also reached out to
Laybuy and are awaiting a response. We have similarly checked
again that we are operating within Laybuy’s recommendations, and
our own investigation has not found anything to suggest
otherwise. We will continue to look at how the customer
experience can be improved as a result of your inquiry.”
Scandiborn
Grace Tindall, founder of Scandibørn, said: “Thank
you for bringing this to our attention. Customers are now
demanding a more flexible approach to payment however their
welfare is of the utmost importance to us. As a result of your
findings, we will be reviewing our processes and making the
necessary changes to be more transparent in our communication of
these payment options.”
