MAS Cost of Living and Financial Wellbeing Blog - Buy now, Pay Later

Welcome to our Financial Wellbeing blog series. In this blog we will be looking at Buy-Now-Pay-Later payment options, including how it is used, things to consider when using BNPL,  as well as an update on future regulations.

If you haven’t read it already we have produced an introduction blog, which explains what we mean when talking about ‘Financial Wellbeing’. You can read this blog here.

What is a ‘Buy Now, Pay Later’ Payment option?

In August our Financial wellbeing team hosted a webinar looking at Buy Now Pay Later payment options, including the pros and cons of using this type of credit. This year Talk Money Week (taking place between 7th and 11th November) is also themed around credit.

BNPL as a payment option has been around for a while, but was traditionally used for things like catalogue orders. In the past few years, BNPL has had a resurgence and are becoming increasingly used by online retailers.

During the Covid-19 pandemic online shopping increased, with the Office for national statistics reporting,

‘Overall, we’re still spending substantially more online than before the coronavirus pandemic. In May 2022, seasonally adjusted internet sales accounted for 26.6% of all official retail sales, compared with 19.7% in February 2020. Although online shopping has been a growing behaviour over several years, the pandemic appears to have accelerated the trend.’

As many were browsing online they may have been offered to 'Try before you buy' or use a 'Buy Now, Pay Later' service, such as Klarna, Clearpay, Laybuy or Paypal Pay in 3. For consumers, these services offer the ability to defer or split payments over a few weeks or months meaning you can receive and even use your purchases before paying for them.

BNPL services can be useful. Perhaps you want to try an item of clothing in a few different sizes; with a service that allows you to pay later, you can effectively bring the experience of a store changing room into your own home. Some BNPL services are interest-free, meaning if you meet your repayments on time you only pay for the items you have purchased. However BNPL is a form of credit and it is important to think of it in the same way you would any other form of credit.


What to know when using BNPL?

Like all financial products, it is good to be aware of the commitments involved when using BNPL services.

  • It is nice to have treats and purchase items that we would really like. However, using BNPL may increase your chances of over-consuming as many are advertised in a way to make you feel like it’s part of the store’s fun and fuss-free online shopping experience. When completing your order, with some BNPL options no money will leave your bank account that day. It therefore becomes that little bit easier to spend more when at the checkout. However, that extra spending can quickly add up and can result in an order being placed that far exceeds your original budget. It can be useful to ask yourself “Would I still place this order if I had to pay in full, today?” If the answer is “No”, it may be worth considering how essential you feel this purchase is.
  • Future planning is an important part of staying within a budget and caring for your finances.  If you would like more information on budgeting and managing finances, our E-Learning Modules are a brilliant resource which can be found here. Consistently using BNPL services can create an unwanted habit of borrowing from your future budget. By electing to pay for something next month or from your next pay or future income, you could create additional confusion and stress regarding your finances. Unfortunately, we know that life is not always straightforward and unexpected costs or new situations can occur without planning. It is worth remembering that may be left with less money for life's emergencies due to needing to pay for a past BNPL order.
  • Using BNPL regularly or creating a habit of always using BNPL can be detrimental to your overall financial wellbeing. Controlling and understanding your finances can be difficult, but being able to understand and remember what monthly or weekly incomings and outgoings we have helps us to feel in control of our money. Deferring payments to a later date can result in a lack of control and disrupt your regular budgeting.
  • Whenever you borrow money, there are always additional elements to consider. Buy Now Pay Later currently does not impact a users credit score, however we are beginning to hear of BNPL being included in reports. Experian have compiled a guide which details how BNPL impacts credit reports and scores. You can read more here. Online lenders such as Klarna still use 'No impact on your credit score' as one of their marketing messages. Unfortunately, this statement is no longer as clear as it should be with new regulations coming in to affect. We suggest making sure to read any literature or fine print to fully understand each service. It is easy to be stung by late payment fees that are not clearly advertised.
  • What happens when making returns, sending an order back or if something goes wrong? If something goes wrong with your repayment or the items purchased it can be hard to know who to turn to. With BNPL you should always contact the service if you feel you may miss a repayment or you in financial difficulty. However if something goes wrong with the retailer this can be a little more confusing.


When using a credit card to purchase an item you have certain levels of protection when it comes to getting a refund, which are contained within section 75 of the Consumer Credit Act. This means that if there are issues with your retailer, you can submit a claim to your credit card company. An example of this would be when Missguided recently went into administration many returns were not processed and requests for refunds were ignored. If you had paid via credit card you would have been able to claim for money lost through your credit card provider, but with BNPL this protection is non-existent. However, BNPL is to become a regulated credit product in the next few years, meaning that similar protections are likely to be put in place.


What does regulation mean and what will happen?

Currently, BNPL payment options were unregulated by the Financial Conduct Authority. This was due to many pay later schemes being interest free and not being spread over more than 12 payments. There was also inconsistency and reduced style of affordability checks when applying for this type of credit. 'However, in February 2021 the UK Government committed to bringing BNPL under FCA regulation due to the potential for consumer harm without the protection that comes with regulation.

Regulations are mainly in place to help consumers, ensuring that there is less risk of falling into unaffordable debt. This means that once they come under regulation, BNPL services will have to be approved by the Financial Conduct Authority before they can offer products to consumers.

These new regulations include;

  • Affordability checks to ensure responsible lending. In June 2022, Klarna began reporting borrowing to credit reference agencies, however, no other lenders have joined the initiative.
  • Advertisement and promotion of BNPL will need to be approved and follow proposed financial promotion rules. This could reduce the number of deals that appear to offer incentives for using a BNPL option.
  • Consumers will be able to complain about a BNPL service to the Financial Ombudsmen Service (FOS).
  • Section 75 protection could be applied to BNPL transactions.


Draft legislation for regulation is due to be published in late 2022. However, Money Advice Scotland and other consumer groups recognise the need for regulation to come sooner rather than later, especially as more and more people turn to BNPL to purchase essentials as a result of the increasing cost of living.

We know that using a BNPL scheme can be a great option for many. However we also understand that personal circumstances can change quickly, leaving shoppers vulnerable to experiencing unaffordable debt through no fault of their own. With the cost of living crisis continuing, regulating BNPL will be important to help consumers avoid using this form of credit for purchasing essentials.

Let us know your thoughts in the comments below or via Twitter @MoneyAdviceScot using the #MASblog or #COLblog.

How have you found using BNPL? What other topics would you like to see us talk about?

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