BBC Panorama highlighted how Buy Now Pay Later could lead to youths racking up debt that can later negatively impact their long-term financial outlook. But viewers stressed that shoppers shouldn’t feel like ‘victims.

Journalist Ellie Flynn investigated the Buy Now Pay Later market’s close relationship with retailers and how a lack of finance and credit checks can lead to users overspending through services like Klarna, Clearpay and Laybuy, even if they are already in debt. 

This programme was able to hear from many shoppers who use Buy Now Pay Later services. One of them is a mother-of-2 who used Zilch for household essentials, such as groceries, nappies and grocery shopping. 

The scheme was also used by Mike, a fashion-conscious shopper who fell behind in payments because he bought clothes that he couldn’t afford otherwise. 

Experts emphasized the benefits of Buy Now and Pay Later, but pointed out that more regulation was needed as suggested by the Financial Conduct Authority.

The current Buy Now and Pay Later service doesn’t require the customer to have a complete credit history, like credit cards companies or banks.

Teaching assistant Mike, 26, from North London, told how he used Buy Now Pay Later services to buy clothes he otherwise couldn't afford in one go. But he fell behind on his repayments

Mike, a 26-year-old North London teaching assistant, shared how he used Buy Now Pay Later to purchase clothes that he couldn’t otherwise afford. However, he was late on his monthly payments.

Viewers accused the programme of putting too much onus on companies like Klarna, Clearpay and Laybuy, and said customers should be able to make informed decisions

Viewers accused Clearpay, Klarna and Laybuy of placing too much pressure on them.

People can still use these services even if they are already in financial debt. It also means Buy Now Pay Later debt isn’t picked up by other providers, or by mainstream credit card companies. 

Borrowers who choose to borrow through Buy Now Pay Later don’t receive the same protection that they get with traditional products. 

A number of viewers accused Clearpay, Klarna and Laybuy of placing too much responsibility on them. They also said that customers should have the ability to make educated decisions. 

One tweeted: “#Panorama seems to be digging at ‘buy Now, Pay Later’ companies while ignoring the bigger problem.

“Youngsters lack self-awareness and feel like victims, moaning about how they have bought things on credit and can’t repay it. 

Another said, “Some people like to blame other people for their own actions.” The #Panorama on #klarna’s Buy Now, Pay Later Companies does not force applicants to apply. Borrowers should be held responsible for their actions. If you can’t afford to buy something, don’t buy it.’

Another added, “I wonder if the feckless spending of some people might be the problem of someone else.” It will be a shock if it happens. #Panorama #BuyNowPayLater.’

Journalist Ellie Flynn, pictured, investigated the Buy Now Pay Later market's close relationship with retailers and how a lack of finance and credit checks can lead to users overspending through services like Klarna, Clearpay and Laybuy, even if they are already in debt

Ellie Flynn is a journalist who investigated the Buy Now Pay Later Market’s relationship with retailers. How a lack in finance or credit checks could lead users to overspending on services such as Klarna Clearpay and Laybuy even if they have debts

Other viewers said the issue was how the products were advertised on retail websites, some of which make Buy Now Pay Later the default purchasing option

Another viewer said the issue was the way that products were advertised online, with some websites making Buy Now Pay Later the default buying option.

Another viewer said that it was the advertising of the products on the retail sites, which can make Buy Now Pay Later the default option. 

People can buy an item using Buy Now and Pay Later. They pay in monthly or weekly installments. There is no need to apply for a credit card and you are not subject to any credit, financial or other checks.  

The UK has an estimated 15million customers who shop with Buy Now, Pay Later. This number increased dramatically during lockdown in response to the rise of online shopping. 

A study found that 30% of those who use these services are between 20 and 30 years old. 

Mike, 26 year old teaching assistant from North London, explained how he bought clothes using Buy Now Pay Later services.

He said that it would be difficult for him to afford those clothes. ‘I’ll pay like £10 this week, £10 next week… That’s what makes you want to use it more. It’s all about the psychology. You don’t feel like you shouldn’t buy it.

Klarna became his primary method of payment, and he was forced to stop using it. 

One mother, from Northampton, pictured, explained how she relies on Buy Now Pay Later to buy essential items while on maternity leave, but admitted it would be easy to overspend

Northampton mother, shown in the photo, shared how she uses Buy Now Pay Later for essentials while on maternity leave. However, she admitted that it is easy to spend too much.

He said, “I was building up a huge debt with them.” Klarna wasn’t available because of my late repayments. I could pay the debt off. 

However, he was able to immediately sign up for Laybuy and Clearpay. 

He stated that he needed another way to access the services. “I went ahead immediately. Laybuy started to collect late payments fees after Mike got behind. The situation is now dire.  

“I still have trouble keeping up with my repayments. They are trying to find a solution. They sent me a message saying that they would pass the information on to debt collectors. I have to make sure I pay it off once I am paid. 

Laybuy released a statement saying that they support customers in financial difficulties and offer payment holidays. 

Iona Bain is a financial expert who explained to me that Buy Now Pay Later should be a good option. 

“The problem is many young people don’t have the ability to pay their owed amounts on time. With some lenders, late fees may be charged and this can quickly add up. 

As time passes by, you may be referred as a debt collection agency. They can employ any method necessary to help you pay what you owe. 

What younger generations don’t realize is how credit can affect their credit rating in the long term. They need this number to get future credit and borrow money. 

“If they damage their credit scores at an early age, it is really affecting their long-term financial prospects.”

Her observation was that the companies are advertising on social media to target the younger demographic. 

Personal finance expert Iona Bain, right, explained: 'If you pay back what you owe and on time then you shouldn't have any problems with Buy Now Pay Later'

Iona Bain (personal finance expert), right explained that if you repay what you owe on time, then there shouldn’t be any problem with Buy Now, Pay Later.

According to her, they are working hard to make Buy Now Pay Later more common among youth. Klarna’s marketing strategy is an excellent example.

“Buy now, pay later” can be viewed as a means to enjoy a more luxurious lifestyle. Buy now and pay later has the genius of making you believe you can get it all now.

Northampton’s mother shared her experience with Buy Now, Pay Later in order to get essential items during maternity leave.   

She stated that she didn’t have the money in her bank so this has been extremely helpful. It’s been a month since I started to buy and have already purchased quite a few.

This was especially important for her mother as she is preparing to spend Christmas with her children. She understands that it is easy to forget about payments and she keeps up with her monthly bills.   

“If you are leaving some…” [accounts with Buy Now Pay Later services]It is very easy to spend too much. You might have a £200 limit on one brand but if you’ve got six of them… You might have a PS200 limit on one brand, but if you’ve got six…

One mother explained that she depends on Zilch for food but is now in a vicious circle.

 ‘You pay one off and then you need to use it again, so you keep using it,’ she said. It’s a vicious cycle. Unless there is a miracle and I win, it will continue.

Zilch released a statement saying that today’s customers are motivated by convenience. This means they will prefer to shop online and make purchases in the most convenient and affordable way. The company claims it blends open banking with soft credits checks to ensure credit scores remain unaffected. 

Financial Conduct Authority (FCA), in a February report, called for the regulation and supervision of the unregulated Buy Now Pay Later Market.   

It noted the use of BNPL products nearly quadrupled in 2020 and is now at £2.7 billion, with 5 million people using these products since the beginning of the coronavirus pandemic. 

Unregulated BNPL products are a viable alternative to higher-priced credit. But, there is also the potential for consumers being harmed by their expansion. One example: More than a tenth of customers at BNPL banks were in arrears.

The market would be sustainable if regulation was in place to protect those who use BNPL Products.  

Alice Tapper, a campaigner and financial journalist explained that it is important to emphasize the fact that Buy Now Pay Later isn’t all bad. 

“Banks have been in good shape for many years – high interest rates, overdraft fees and expensive interest – it is refreshing to see that there are some new innovations on the market. 

“It all comes back to protecting young people from credit. 

BBC Panorama requested Laybuy, Clearpay, and Klarna be interviewed. Laybuy only agreed. 

Gary Rohloff is the co-founder of Laybuy. He stated that Laybuy will soon be popular because it offers an alternative to credit cards. People don’t want to pay interest and are looking for a way to have more control over their life.

“We were very involved in the Woolard review, and we support the recommendations made that revolve around credit and affordability monitoring and continuous credit reporting.

Klarna stated in a statement that the average age of UK clients is 33. These short term, interest-free credit products help to avoid debt. You must make a purchase to qualify for the credit. The credit has strict spending restrictions and can be rescinded if payment is not made on time to avoid debt buildup.

Clearpay stated in a statement that traditional credit checks are not applicable to small purchases. Customers build trust and start off with smaller amounts. These limits increase as they see positive payments.