Britons now have the option to use buy now, pay later when they shop on the Amazon website, following a partnership between the retail giant and Barclays Bank.
A new flexible payment method, ‘Installments from Barclays’, will enable Amazon shoppers to fund purchases of £100 or more across their account.
Buy Now and Pay Later credit can be used on millions of items, including those from thousands of small and medium-sized businesses that sell on Amazon.
The UK is the second country where Barclays and Amazon have worked together to offer reusable credit accounts after last year
BNPL schemes such as this enable shoppers to pay for goods in installments after purchasing an item, often using informal credit agreements.
Although most of the BNPL remains unregulated, according to Barclays, their partnership with Amazon is already fully regulated by the FCA.
An increasing number of Britons have used BNPL schemes during the pandemic as people have turned to online shopping during successive lockdowns.
Spending through these payment methods more than tripled between January and December last year.
And 28 per cent of Britons made at least one BNPL payment in October this year according to Equifax, up from 23 per cent in December 2020.
At present, the sector is dominated by three major players, Klarna, Clearplay and Laybuy – Klarna being the largest with over 13 million shoppers spending £2.7 billion annually in the UK.
Barclays will charge 10.9 per cent APR on BNPL purchases, although promotional rates and interest-free financing may be available at certain times.
Barclays’ move is seen by some as an early sign that banks are willing to offer BNPL services, with others likely to follow suit.
‘I think the big banks want their piece of the BNPL action and push back against the likes of Klarna who would have taken a fair share of their business over the last couple of years,’ said Andrew Hager, personal finance expert and founder of Moneycomms.
The Barclays deal is like having an Amazon online store card with a pre-agreed interest rate and an agreed credit line at the outset.
“We may see similar ties next year as the BNPL appears to become a growing threat to established credit card companies.”
What does this mean for Amazon shoppers?
Installments by Barclays will allow Amazon shoppers to spread the cost of their largest purchases (over £100) over three to 48 months, although the minimum monthly payment allowed is £15.
Barclays will also charge 10.9 per cent APR on these purchases, although promotional rates and interest-free financing may be available at certain times.
The APR is the Annual Percentage Rate, which is the total amount you pay on your financing over the course of the year.
This means someone financing the cost of a £599 TV on Amazon via installments over 12 months can expect to pay a total of £634.95 after adding 10.9 per cent APR.
The bank claims that there are no account management fees, late fees, statement fees or other hidden charges.
Rocher Rodriguez, European President of Barclays Cupid & Consumer Bank, said: “This is another major step in our ambition to reinvent point-of-sale payments and customer delight.
Amazon offers a world-class shopping experience, and this new service gives users a fully reusable installment payment option, which they can use to spread the cost of purchases over a longer period.
How it works?
After adding eligible items to their cart, shoppers will be able to change their payment method from their credit or debit card to Barclays Installments and click to submit.
They will then be redirected to the Barclays application form to enter their personal information and the bank account they wish to cover the monthly costs with.
In most cases, shoppers will receive an immediate response from Barclays letting them know if they have been approved, and setting their spending limits.
Barclays will calculate a personal credit limit and monthly payment limit and decide whether repayments are affordable for each shopper.
If accepted, shoppers can make repeat purchases using their credit account without having to reapply, albeit while staying within their credit limit and monthly payment limit set by Barclays.
The credit limit is the maximum amount they can spend in total through their installment account.
Barclays will calculate a personal credit limit and monthly payment limit and decide whether repayments are affordable for each person who applies.
The monthly payment limit is the total amount their payments can add up across all their BNPL purchases.
However, when shoppers pay off their plans, they will free up a credit, which they can then spend again.
Please note that shoppers will not be able to use this service to purchase groceries, gift cards, subscriptions, pre-order, or digital, intangible, or out-of-stock items.
The BNPL currently remains unregulated in the UK, but in late October the Treasury opened a consultation that will continue into next month about how it will be regulated in the future.
It comes as Brits are set to spend £1.3 billion this Christmas using buy-now-pay-later with nearly three in ten households expecting to rely on it, according to a study by Scottish Friendly.
A similar figure said the higher cost of living means they are more dependent on using BNPL to make Christmas-related purchases than they would like.
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