Concern over buy it now, pay later deals as Amazon launches new payment system

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Millions of shoppers are signing up to finance deals without realizing they are going into debt, a consumer body has warned.

Which? called for stronger safeguards to regulate buy now, pay later ( BNPL ), which allow buyers to delay paying for an item without interest or fees, unless you don’t repay on time.

The payment terms are particularly attractive for those under 30, and from Amazon BNPL’s recent market entry has opened up the option for millions more people who may be tempted to spread the cost of their purchases.

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Amazon’s partnership with Barclays Bank differs from other BNPL providers as it is already fully regulated by the Financial Conduct Authority (FCA) – but it has an APR cost of 10.9%, although the online giant has said promotional rates and interest-free financing may be available at times.

At present, the sector is dominated by three main players, Klarna, clear game and laybuy – Klarna being the biggest with over 13m shoppers spending £2.7bn a year in the UK.

PayPal also offers a similar offer to certain customers with its Pay in 3 option, although Paypal is also regulated by the FSA, which means that customers can ultimately seek redress from the Financial mediator if things go wrong.

The merger between Barclays and Amazon, called, Payments by Barclaysis seen by some as a harbinger that banks are ready to offer BNPL’s services, with others likely to follow suit.

Andrew Hagger, personal finance expert and founder of Moneycoms said: “I think the big banks want a piece of the BNPL stock and fight against companies like Klarna who will have taken a good chunk of its business over the last couple of years.

“The deal with Barclays is like having an online Amazon store card with a pre-agreed interest rate and credit limit.

“We could see similar tie-ups next year as BNPL appears to be a growing threat to established credit card companies.”

Although BNPL is a form of credit, it works differently from more traditional methods of borrowing such as credit cards. For example, not all BNPL systems perform “rigorous credit checks, where a full search of a person’s credit report is performed.



Amazon’s entry into the BNPL arena with Barclays Bank could mark the start of banks offering similar deals

In response to concerns, the government announced last February that The BNPL would be regulated by the Financial Conduct Authority, although the rules are unlikely to come into force before the end of this year or in 2023. A Treasury consultation, which will end on Thursday January 6, will be followed by an FCA consultation .

In the meantime, according to the consumer organization Which?

He said many of the BNPL users he interviewed did not view these transactions as a form of credit – instead, they described them as a “means of payment” or a “money management tool”. silver”.

Rocio Concha, Director of Policy and Advocacy at Which?, said: “BPL systems can offer speed and convenience at checkout, but our research shows that many users don’t realize they are getting into debt or consider the possibility of missing payments. ”

The consumer body said that, “given the immediate risk”, BNPL firms should make their terms and conditions more accessible now. He added that affordability assessments should be carried out for all transactions before the regulations are introduced.

Spending through these payment methods more than tripled between January and December last year.

And a record 28% of Britons made at least one BNPL refund last October, according to Equifax, up from 23% previously.

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