Major UK bank reveals plans to launch buy now pay later within months

A MAJOR high street bank has revealed plans to launch a buy now pay, later service for customers.

NatWest is planning on rolling out the service from this summer, following HSBC and other banks in offering the payment option.

Buy now, pay later is a type of credit lets customers pay for their shopping in interest-free monthly instalments to spread the cost.

As the name suggests, it lets you buy things now and pay for them at a later date, usually within 30 days.

But shoppers have previously been warned that it’s easy to rack up debt using these services, and if you can incur high charges if you don’t meet the repayments.

Customers will be able to use Buy Now, Pay Later scheme will at most places which accept Mastercard.

The bank said it will put safeguards in place to ensure that the lending is affordable.

This means excluding certain spending categories, such as gambling, as well as getting rid of cash advances and balance transfers.

Natwest will offer a fixed credit limit, which will be made clear to the customer in advance.

We’ve asked NatWest what this limit is and will update you as soon as we know more.

Customers will be able to keep track of payments and see how much they owe through NatWest’s mobile app.

The bank will also offer structured repayments, credit scoring and affordability checks.

David Lindberg, chief executive of retail banking NatWest, said: “There’s a clear demand for buy now, pay later and we are determined to make it better and safer.

“We have listened to our customers and are excited to provide them with a proposition that gives them greater flexibility to manage their finances.”

But shoppers are being urged to use any credit responsibly.

Critics have warned that it is easy to fall into financial difficulty by using Buy Now, Pay Later.

An estimated eight million adults owe money on BNPL purchases, according to recent research.

The Woolard Review found that while the popular schemes give consumers an alternative to more expensive credit, it also puts them at risk of getting into debt.

One of the concerns around BNPL is the “light touch” to credit searches.

BNPL lenders do a “soft search” before agreeing to give you credit, meaning they will  look at your financial circumstances but not as in-depth as for other credit products.

These soft searches do not appear on your credit history either, so shoppers can use several BNPL providers at once, borrowing large amounts in total because each provider can’t see how much they are borrowing from each one.

The Woolard Review found that more than one in 10 customers of a major bank using BNPL were already in arrears.

Changes to the industry

There are calls for rules on BNPL to tighten up as it becomes a more popular way for consumers to buy.

BNPL use nearly quadrupled in 2020 hitting £2.7billion, but the firms are not currently regulated by the FCA in the same way as other borrowing.

But there are plans for BNPL to become a regulated by the Financial Conduct Authority (FCA) regulation.

After a report last year, the firms will be regulated to stop millions of shoppers plunging into debt.

Already, the regulator has told firms to make their terms and conditions clearer.

It said it was concerned there was a potential risk of harm to consumers because of the way some firms’ terms were drafted.

The purchases are also starting to appear on credit reports for the first time, meaning lenders will be able to see shoppers’ borrowing.

BNPL does not currently impact credit scores, unless you miss repayments, and debts can also be passed on to debt collection agencies.

But that will change when agencies including TransUnion will start including the borrowing on credit reports later this year.

We’ve asked NatWest if its payments will appear in the same way.

Debt help

You should never borrow more than you can afford to pay back and shoppers should also always shop around to see if there’s a better borrowing option available.

If you miss payments, it can impact your credit score, which could stop you getting a loan, credit card or mortgage in the future.

If you are worried about debt, speak to your lender, which may be able to offer you an affordable payment plans.

Debt advice charities such as , or  may be able to offer you guidance.

Debt charity StepChange recommends that you ask yourself the following questions when shopping online and consider using BNPL:

• Is the money needed for the purchase within your weekly (or monthly) budget?
• If BNPL was not available, would you still make the purchase?
• Is what you’re buying a necessity?
• Can you wait for the item until you next have some money to spend?

HSBC launched it’s own buy now, pay later option for credit card customers in July last year.

Meanwhile Ikea started offering a new financing option of its own that was closer in style to popular buy now, pay later schemes in May.