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London, UK Posted 2 years, 7 months ago

Monzo Unveils Buy Now, Pay Later Product With 3,000 Limit

Digital bank's Flex scheme joins controversial market that allows customers to stagger payments without interest or fees

The digital bank Monzo is muscling in on the UK’s booming “buy now, pay later” market and will be offering its customers credit limits of up to £3,000.

Monzo is one of the first UK banks to launch into the fast-growing but controversial BNPL sector, which is dominated by financial technology companies such as the industry leader Klarna and PayPal.

Monzo, which has more than 5 million customers, said it had taken the “best bits” of BNPL, credit cards, loans and overdrafts to create its Monzo Flex product, which it is introducing from Thursday.

BNPL credit allows customers to stagger payments for goods such as clothes, beauty items and furniture with no interest or fees – unless they fail to pay back on time, in which case some firms will impose late fees.

Invitations to use this method of payment have become an increasingly common sight when online shoppers get to the checkout, and companies are starting to offer more services allowing people to pay for items this way when shopping in person.

The use of BNPL soared in 2020, reaching £2.7bn in transactions, according to official data, and it has been estimated that anything between 5 million and in excess of 10 million UK consumers made use of this type of borrowing last year.

Monzo Flex can be used for online and in-person purchases over £30 and, like Klarna, it will let people repay what they owe over three instalments and pay nothing extra. It calls this “Pay in three for free”. The slogan “Pay in three” is also used by Klarna and PayPal.

Customers can also opt to pay in six and 12 instalments, but with these options they pay interest at 19% APR.

The bank said it would be offering customers pre-approved credit at the checkout – up to an approved limit of £3,000 – after a “comprehensive affordability assessment”. It will also let people use Flex to pay for something up to 14 days after they buy it.

Customers can pay off extra or early with no fees and, as with some other BNPL providers, there are no late payment fees. PayPal, which launched its UK BNPL service in October 2020, recently announced that it is scrapping late fees from its BNPL products globally for all new transactions from 1 October this year.

Ministers and regulators have previously expressed concern that with BNPL, shoppers can take out multiple agreements with different providers, so that it would be relatively easy to rack up about £1,000 of debt that credit reference agencies and mainstream lenders cannot see. However, Monzo said that, as a regulated bank, it reports to credit reference agencies, so other lenders will be able to see that a customer is using Flex.

 

Read the full article at: theguardian

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