Buy now and pay later attracts more and more consumers
Published: Tuesday, Nov 26th 2024, 11:30
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Around Black Friday, payment providers are once again vying for new customers. The "buy today, pay later" model is also becoming increasingly popular in Switzerland. However, consumer advocates do not think much of "buy now pay later" (BNPL).
In the hunt for bargains, many consumers click their fingers to store online in the days surrounding the Black Friday discount battle. However, the "shopping euphoria" can also be followed by a "credit hangover" due to new payment options.
First a niche market
In contrast to credit cards, for example, the BNPL approach is that a retailer offers a product via a third-party provider using installment payments. Credit card providers usually charge higher interest on amounts due, but offer more flexible repayment options. With BNPL providers such as Klarna or CembraPay (formerly Byjuno), payment by installments is usually automated.
Experts estimate that the market share in Switzerland is now between CHF 1 and 5 billion per year. For comparison: according to the Swiss Payment Association (SPA), there are around 8.5 million credit cards in circulation in Switzerland. Swiss retailers thus generate annual sales of 32 billion Swiss francs. BNPL offers are therefore still a niche market.
BNPL as a "debt driver"
However, BNPL is becoming increasingly popular in Germany, the UK and the USA in particular, according to the Retail Report by payment service provider Adyen. Younger customers in particular often buy on credit. With sometimes questionable consequences: According to figures from Creditreform, the only increase in over-indebtedness in Germany last year was in the 18 to 30 age group.
BNPL is therefore often regarded as the "problem child" of payment transactions and regularly attracts criticism from associations and consumer protection organizations: "It generally makes sense not to pay until you have received the goods," advises the Swiss Consumer Protection Foundation, for example.
"However, if the company works with payment processors such as Klarna or CembraPay, buying on account harbors a number of risks and can become a debt trap," says Livia Kunz, Head of Legal Affairs at Consumer Protection.
It is generally recommended that when purchasing on account, the amount is paid "on time" and "all at once". It is not advisable to enter into payment agreements in installments.
In addition, in the case of "purchase on account with subsequent offer of payment in installments", the entire amount is generally owed at once. According to Kunz, there is therefore a lack of protective mechanisms to prevent indebtedness.
Growing success
The fact that BNPL is not yet a resounding success in Switzerland is probably also due to the merchants themselves, as Severin Pflüger, Managing Director of the Association of Electronic Payment Transactions (VEZ), explains on request: "This is because merchants are charged fees for BNPL."
However, many are not prepared to sacrifice margin for another means of payment: "Retailers distrust the BNPL providers' argument that this reduction in margin will be compensated for by an increase in volume," says Pflüger.
The Swiss market of BNPL providers such as Swissbilling and Byjuno is nevertheless recording high growth. For example, Cembra Money Bank, which specializes in loans, reported in its half-year report that net receivables from customers in the BNPL segment grew by 12% compared to the previous half-year.
In the credit card segment, net receivables from customers "only" increased by 3%, but the total amount amounted to CHF 1.1 billion. At BNPL, the figure is just 0.2 billion.
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