The hidden cost of Buy Now, Pay Later
Apple Pay Later, set to launch as part of iOS 16, will allow customers to pay for purchases in instalments over six weeks. This is a big step by a big player into a world of easily available credit that has reshaped how many people approach and consider debt. Buy Now, Pay Later (BNPL) services were initially pitched as a way to delay payments for non-essential goods like clothes and electronics without negatively impacting people’s credit ratings. They’re especially popular among young people, with 42% of 16- to 24-year-olds in the UK using a BNPL platform between 2021 and 2022. With these services not requiring a hard credit check nor (currently) reporting debt to consumer credit bureaus, they’ve become a welcome alternative to traditional credit. But the low-consequence, no-strings reputation BNPL still enjoys among many is not the truth for a growing cohort. In March, Citizens Advice in the UK found that one in 12 people use BNPL on essentials like food, and two in five BNPL users have turned to other credit to cover BNPL debt. Apple Pay Later is being released initially in the US, where 43% of young BNPL customers have missed at least one payment. These figures unveil an alarming debt crisis and illustrate a broken perception of credit and its consequences, made worse by a cost-of-living crisis and lack of financial education. Fears for consumer safety are growing, with the advent of regulation in the UK thought by some to be too little, too late. There is a version of BNPL that is an ethical, beneficial part of the economy. So, as people seek help through a worsening financial crisis, how can brands open up access to goods while protecting consumers from the dangers of exploitative credit?
