Entering the concluding months of the year, commonly referred to as the ‘golden quarter,’ retailers leverage Buy Now Pay Later (BNPL) as a strategic tool to boost sales.

The advantages of BNPL for consumers are evident. In contrast to credit cards, which involve a stringent approval procedure and higher fees, BNPL provides swift approval with more lenient lending criteria.

BNPL services conduct only a soft credit check, leaving no impact on the customer’s credit rating, and offer low or interest-free rates. Additionally, BNPL grants instant access to pricier items.

However, a recent report from Citizens Advice reveals potential pitfalls in the BNPL customer journey, highlighting concerns about the lack of necessary care, information, and affordability checks that could lead people into financial hardship.

The appeal of Buy Now, Pay Later

Many UK consumers are attracted to the convenience of BNPL, which allows them to acquire goods and services without an immediate financial burden.

The appeal lies in the ability to defer payments over time, making it an attractive option for those looking to manage their cash flow effectively.

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By GlobalData

Hidden dangers: lack of care and information

Despite its popularity, the Citizens Advice report emphasises the shortcomings in the BNPL system.

Customers often face a lack of care and information during the sign-up process, raising concerns about whether individuals fully understand the financial commitment they are making.

As a credit product, BNPL requires a thorough understanding to prevent users from falling into debt inadvertently.

The importance of knowing the consequences

One of the critical aspects highlighted in the report is the necessity for users to comprehend the consequences of BNPL if they find themselves unable to make repayments.

As a credit arrangement, failure to meet payment obligations can lead to debt accumulation and potential financial struggles.

It underscores the importance of clear communication and robust affordability checks to ensure that users are well-informed about the risks associated with BNPL.

As the popularity of BNPL continues to rise, understanding the potential risks and consequences becomes paramount for consumers to make informed financial decisions and avoid unintended debt traps.

Retailers should take heed and improve the transparency of their adoption and management of Buy Now, Pay Later initiatives.