Buy Now, Pay Later

The Bottom Line

BBC

Personal Journals, Business, Society & Culture

4.6 • 615 Ratings

🗓️ 24 February 2022

⏱️ 29 minutes

🔗️ Recording | iTunes | RSS

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Summary

What's behind the explosion in popularity of Klarna and its competitors? Most of us have found ourselves wanting something that we can’t quite afford. If you’re low on funds and waiting for money to come in, there are a multitude of borrowing options, from overdrafts and loans to credit cards. A new option that is expanding fast is the Buy Now Pay Later model, where customers have the option to pay back money for their purchases and there’s no interest charges - provided the debts are cleared on time. But is it too good be true? Join Evan Davis and his panel of experts to get to the bottom of the BNPL industry

GUESTS Alex Marsh, Head of Klarna UK Alice Tapper, financial journalist Sameer Pethe, Financial Services Partner, Kearney

Producer: Lucinda Borrell Sound: Graham Puddifoot Production Coordinators: Sophie Hill and Siobhan Reed Editor: Hugh Levinson

Produced in association with the Open University

Transcript

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0:00.0	BBC Sounds, Music, Radio, Podcasts.
0:04.9	Hello and welcome to the programme.
0:07.4	Now, you might view the entire history of capitalism and trade, going back a very long way,
0:12.3	as one adventure after another into different forms of credit.
0:16.4	Now, in recent history, credit has always played a big part in keeping the wheels of trade turning,
0:22.4	whether it's credit cards, store cards and shop credits.
0:25.7	And now we have Buy Now Pay Later.
0:29.4	And we will get to understand it today with my three guests.
0:32.6	And the first of whom is Alex Marsh, head of Clana, UK.
0:41.7	Alex, talk us through a typical customer experience.
0:47.4	So specifically, by now, pay later products, more to consumer-bative experiences, when they come to the checkout and to make their purchase. Online.
0:50.2	Predominantly online. They'll have the option to use Clna. Within that, they have a range of choice
0:55.0	in terms of how they pay. In terms of by now, pay later, that would give them the option to spread
0:58.9	the cost of that purchase, interest-free, free of fees, over a short period of time. The average
1:04.5	transaction value that we see in the UK is around £75. The most common sector in the UK at
1:09.5	the moment is fashion and beauty, although we are seeing
1:12.8	it now in other areas. The merchant is paying Klanar, a small fee to give that flexibility and
1:17.9	choice to their customers. So we'll make it very easy for the consumer to apply for the credit.
1:22.6	We'll undertake the eligibility assessments in terms of whether credit is the right option for
1:26.1	them or not. We will then, in terms of the retailer, they will receive the value of the purchase upfront from Clana, less that small fee. And then from retailer perspective, they have certainty of the sale, they get their money up front. Right. Now, what is the difference between me doing a Clana purchase and me using my credit card? Yes, I think the key common factors. One is it is ultimately
1:45.7	saving the money, so it's interest-free. Now, well, that's the true of the credit card there, is it. Yes, but key point there is. So from our side, we're a merchant-funded model, so we receive a fee from the retail. But that's also true of the credit card. I'm sorry, you know, the credit cards are primarily, though, reliant on consumer revenue. They are absolutely reliant on consumers who
1:44.4	are unable to pay off the full balance. If we all paid
	...

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