Buy Now, Pain Later

Ahh Buy Now, Pay Later (BNPL), where do we start? Since when did splitting up payments for a T-shirt or mascara become the norm? In this article, we’re going to be lifting the lid on BNPL and giving you some reasons as to why we think they should be avoided at all costs. From targeting women and making debt pretty to hindering young people’s financial growth, there’s a lot to be said for these checkout credit providers. Let’s get into it.

What does Buy Now, Pay Later mean? And how does it work?

BNPL is a financial product that allows people to split or delay payments to make them more manageable in short term. As a credit product, it is inherently risky. These checkout credit providers make their money by taking a cut from anything they help a retailer sell.

There’s something to be said about the customer journey of these companies, they should be making their customers aware of the risks and potential harm they would be subject to if they were to fall short on keeping up with their payments. But these companies fail to provide the information, affordability checks and care that should be put into place. Instead, they perceive themselves as a pretty add-on, targeting women with full baskets on their favourite clothing websites. Why wouldn’t you want to pay £19 today rather than £79? Keep reading, we’ll tell you.

BNPL is targeting women

With many online clothing retailers offering a selection of these checkout credit providers, whose customers are predominantly women, these schemes are simply providing women with another option to damage their financial growth.  With fluffy branding, using influencers to promote and partnering with fast fashion brands that target repeat customers – they are working harder than ever to convince women to spend more money, more frequently.

There is already a gender gap when it comes to attitudes towards financial services. In a research article from Dave Wallace, he states that women seem to be less aware of the financial services beyond the ones they are customers of, which could mean some women know more about BNPL than they do about an investing ISA.  We see male CEOs and investors of BNPL companies making money off women who are taking the hit by spending more than they perhaps should on clothes they can’t afford.

When we ask people why they use BNPL, they spout the very phrases used in the creative copy of BNPL products – meaning the marketing is absolutely working.  “I want to try on a few things”. “I want to order multiple sizes”. “I’m not sure if I want it yet so I will pay with ***** and see”.  Women are starting to see BNPL as a default payment method, paying off their BNPL like a credit card in the coming months.

BNPL is NOT a budgeting tool

Don’t be fooled by the clever and aggressive marketing from these companies. No matter how pretty their branding is and how logical they make BNPL sound, they are not budgeting tools.  In actual fact, when using a BNPL product, you are actually more likely to spend more than originally planned. Let’s take the leading BNPL company, who we won’t mention but you can guess. They pitch themselves to online retailers with the promise to increase the frequency of purchase by 20% , convert 50% more transactions and worryingly, increase the average basket value by 55%. They make money by you spending more than you can afford, and on top of that, they make you think only a crazy person would wait till payday! We’re rolling our eyes too.

BNPL is a dangerous mindset

Checkout credit providers are most young people’s first interaction with credit. It’s instilling a mindset of instant gratification within a generation who still live at home and have no other financial responsibilities. If this is their present norm, what can be said for their future when it comes to credit use?

Research has found that 26 % of people regret using a BNPL product and 41% have struggled with making a repayment – the most common reason for this being people spending more than they can afford. This growing mentality of getting what we desire and dealing with the payment side of things later is super damaging. Debt and mental health issues are intrinsically linked, with one in two adults suffering from both debt and mental health issues. Debt can cause – and be caused by – mental health problems.

Almost two in five of those who’ve used BNPL products didn’t think it was ‘proper borrowing’. This mindset can easily be transferred onto other circumstances when credit is available such as car finance and credit cards.

Our solution

We may have made our opinion on Buy Now, Pay Later pretty clear in this article and across our social platforms, but for good reason. At Financielle, we don’t promote a frugal lifestyle, we want to help you be financially well and be able to treat yourself to the finer things in life whilst having sustainable financial growth. We’ve had community members remove this as a payment method from their lives forever and feel on top of the world because of it.  So, ditch BNPL and instant gratification, save for what you want and don’t live beyond your means.

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By Lucy Whisker.