Another ‘buy now, pay later’ firm to launch in Britain with a major retailer – can Laybuy make as much of a splash as Klarna?
- Buy now, pay later options are becoming popular way to purchase goods
- Customers may want an item right away – but wait until payday to finance it
- New Zealand-based Laybuy lets shoppers split payments into six weekly chunks
A New Zealand payment platform has become the latest foreign entrant to the UK’s rapidly growing ‘buy now, pay later’ market.
Laybuy made a big impact in its native New Zealand, claiming it signed up 200,000 users and partnered with 2,750 stores in just 18 months.
Unlike popular Swedish import Klarna, it can’t boast the backing of a rap icon, but it does claim it will mark its official launch in Britain with ‘a major retailer’.
Buy now, pay later: The Laybuy website has a similar feel to Swedish firm Klana
The firm says it is putting a modern twist on the antipodean practice of the ‘lay by’, where shoppers pay for goods in instalments and receive them upon the completion of the payment.
With Laybuy however, shoppers get the item up front and then pay it off in instalments.
Six of them to be precise, one of which is taken at the time of the item’s purchase, while the rest are taken automatically in subsequent weeks.
Paying with Laybuy is offered as an alternative service at the checkout if the shop has partnered with the firm, just like paying with Klarna.
That though is really where the similarities with the Swedish firm end.
Klarna, for all its pledges of openness and being ‘smoooth’ refused to share with This is Money its default rates and failed to mention on its website that customers would be passed onto debt collectors after 120 days.
What about Paypal Credit?
Another recently new spending option online, which was heavily advertised on television at the tail-end of 2018, is Paypal Credit.
It offers shoppers using a retailer that accepts Paypal and spending more than £150 – a four month interest-free option for purchases.
On its website, it states: ‘If you’re planning a weekend away or fancy splashing out on a new wardrobe, PayPal Credit is the perfect way to spread the cost of those larger purchases.’
It adds: ‘Any remaining balance due after the four month promotional period or any transactions under £150 will be charged interest at 17.9 per cent per annum
It also enabled customers to pay later without a Klarna account, needing to provide only a UK bank account, address, email address and date of birth.
Laybuy appears to have much more rigid set of hoops to jump through.
Like Klarna, anyone over 18 can open an account with the New Zealand firm, but it will carry out a hard credit check using Experian – which means it will be visible on your credit score regardless of whether or not you are accepted.
This check is used to assign your credit limit, which according to Which? is between £60 and £600.
You can still spend more than your limit, but Laybuy says that changes the way in which you make payments.
For example, if you have a limit of £120 and want to purchase an item for £200, your designated debit or credit card will be charged £80 on the date of purchase.
That is, the £80 ‘limit excess’ and your payments for the next 5 weeks will be £24 per week.
On top of that, while it doesn’t charge any interest or up-front fees, it will hit you with a £6 charge for each late payment, while it adds that any defaults may result in you being contacted by debt collectors and will affect your credit score.
However, its co-founder and managing director, Gary Rohloff said its default rate was less than one per cent, and added someone’s account would be suspended so they can’t continue spending.
Just like Klarna though, it seems to make its margins based on consumers spending more when they use the payment platform.
It claims that UK shoppers are borrowing an average of £102 per transaction.
In an interview with Rohloff in January this year, Business Leader reported: ‘Retailers partnering with Laybuy have seen an average increase in order value of 60 per cent, an average increase in online and in-store conversion rates of 50 per cent and an average increase in new customer acquisitions of 30 per cent.’
This echoes concerns raised by This is Money and others in our report on Klarna about how these ‘buy now, pay later’ services could be a way of encouraging people to spend more money than they have on items they potentially don’t need.
Unlike Klarna, Laybuy does not currently provide any links to debt advice charities or offer any advice or help of its own to those who may be struggling with debt.
THIS IS MONEY’S FIVE OF THE BEST SAVINGS DEALS