Londoners urged to ditch ‘Buy Now, Pay Later’ schemes

Londoners are being encouraged to reduce their reliance on ‘Buy Now, Pay Later’ (BNPL) schemes because they “can ruin people’s personal finances for years”.

Financial coaching app, Claro, has launched a billboard campaign around London to warn consumers about the dangers of BNPL which allows users to spread out payments for items, or postpone their bill to a later date.

Once a niche form of credit, BNPL has surged dramatically in popularity on the back of the pandemic, especially among millennials and younger shoppers. This in turn has led to an accumulation of problem debts.

Earlier this year, a review by the City watchdog, the Financial Conduct Authority, said the unregulated BNPL market had more than trebled in size during 2020, posed potential harm to consumers and recommended its inclusion within the sphere of financial regulation.

Claro’s campaign includes research from its Mental Health Project report produced in partnership with Mental Health UK and The Money Charity.

The report found that 41% of people have been living beyond their means at some point over the past 12 months. It also revealed that 20% of households couldn’t last a month, without needing to borrow money, if they lost their main source of income.

Claro acknowledged that there is nothing wrong in using BNPL if the debt is paid off within 30 days, or soon after the pay-back period. “However, the truth of the matter is for many, using BNPL schemes becomes a habit and the problem is exacerbated as more retailers provide the service at the point of purchase.”

The campaign appears in several prominent locations around the capital, including Oxford Street, London Bridge and Canary Wharf. As part of the initiative, Claro is offering 1,000 free, one-to-one personal finance coaching calls to members of the public helping them to build sustainable financial habits.

Rob Brockington, CEO at Claro, said: “There are parallels between the safe use of credit cards and BNPL products, however there isn’t currently the same level of awareness around the considered usage of BNPL products like there is with 0% interest credit cards and their strict no repayment fee terms.”