Home » Fintech » Buy now pay later – a new way to pay

Nick Molnar

Co-CEO and Co-founder, Clearpay

Anthony Eisen

Co-CEO and Co-founder, Clearpay

A growing number of consumers are switching away from credit cards to a buy now, pay later style of shopping.

Having seen the impact of the 2008 global financial crisis on their parents’ generation, millennials became more averse to financial risk. The result was a shift from credit to debit payments, according to industry expert and Clearpay co-founder, Nick Molnar.

Fast forward to 2020, as COVID-19 hit, this trend was exacerbated further with a strong shift toward e-commerce. As debit payments have become more popular with millennials and Gen Z, so has the use of BNPL – buy now, pay later.

Payment ecosystem

Spending globally on BNPL has increased rapidly over the last two years, up 300%, while credit card purchases have flatlined.

That has seen a significant change in the payments ecosystem, with younger shoppers more wary of revolving debt and altering their spending and saving ethos.

Molnar, who is co-founder and co-CEO of BNPL specialists Clearpay with Anthony Eisen (known as Afterpay outside the UK and Europe), founded the company with a mission to create an economy where everyone wins through fairness and financial freedom. He explains how their product has made a significant impact on the financial and retail sector.

Inbuilt protections

While still in the early stages of growth, it is powering a shift from a credit to a debit economy with more than 10 million people in the UK using BNPL services to buy online in 2020.

“As payment methods change, with increasing use of smartphones, contactless cards, mobile wallets and mobile banking, retailers can increase consumer choice by offering BNPL options and transfer the risk of late or non-payment to the BNPL provider,” Molnar adds.

Clearpay has extensive inbuilt protections that safeguard customers. They do not charge interest, late fees are capped and accounts are automatically paused if a single payment is late, so that customers cannot overspend or fall into a revolving debt trap. They have low initial spending limits, with higher limits only allowed after consistent on-time payment behaviour is demonstrated Credit checks are not conducted so the customer’s credit score is not impacted.

There is still work to be done and it is crucial that new measures account for the varying forms of the BNPL industry.

Sector regulation

With proposals for regulation of the sector, Eisen believes the consultation paper from Her Majesty’s Treasury has “introduced some sensible measures that will go a long way to creating a proportionate regulatory framework for the industry.”

“Regulation of the sector will set a high benchmark for responsible practice in the industry and will create standards that ensure good consumer outcomes and deter bad actors,” Eisen says.

“However, there is still work to be done and it is crucial that new measures account for the varying forms of the BNPL industry.”

He says that consumers will be best served by products that have been designed with strong consumer safeguards within them.

Financial innovation

As for the future, with millennial and Gen Z share of spend predicted to grow to 47% by 2030 across Australia, the UK and the US, Clearpay expects the market to grow with double digit expansion over the next few years and plans to move into purchase areas such as kitchen and home, athletic equipment, pets, travel and tickets. It has also recently launched an in store service with a number of high street brands in the UK.

Afterpay launched in Australia in 2014, and is available in the US, Canada and New Zealand. It launched as Clearpay in the UK in 2019 and in Europe earlier this year.

Clearpay allows shoppers to receive products immediately and pay in four instalments over six weeks, always interest-free.

It earns revenue through merchant fees, allowing it to offer a free service to customers who pay on time. In return, merchants are paid upfront, with Clearpay taking on the risk.

Clearpay partners with more than 6,000 retailers and small businesses, including Pandora, The Fragrance Shop and Sweaty Betty.

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