Marks & Spencer is letting customers buy now and pay later for their Christmas shopping - but is it a good idea?
Marks & Spencer is launching a ‘buy now, pay later’ scheme on its website for customers in an attempt to boost trade during the Christmas rush.
The interest free scheme, set up in collaboration with a firm called Clearpay, will see customers offered the option to pay for items that cost more than £30 in installments.
It is hoped that this will attract younger customers to the struggling retailer and encourage people to do their Christmas shopping at M&S.
How does it work?
‘Buy now, pay later’ services are becoming increasingly popular, with Clearpay’s Australian rival Klarna among the ‘fintech’ (financial technology) companies seeking to appeal to younger consumers on tight budgets.
The services are already offered by the likes of Asos, Boohoo, JDsports and H&M.
Marks & Spencer has said that its customers have been increasingly eager to spread the cost of purchases, especially those of high value.
The Clearpay service allows purchases between the values of £30 and £800 be paid for in up to four installments over the course of up to six weeks.
No credit application is required and there is a phone app via which customers can monitor their payments.
What’s in it for M&S?
Although firms like Clearpay take a commission on each purchase, research has shown that shoppers using these fintech companies typically spend more, more often.
This makes it a beneficial option for companies where sales are in decline, like they are with clothing at M&S.
Currently there are more than 4,000 retailers using Klarna, and UK-based Clearpay has said that it has gained more than 200,000 active customers since it started trading three months ago.
However, the debt charity Stepchange has warned that the schemes could encourage people to spend money they do not have.
Risk of causing debt
A spokesperson for Stepchange said, “Buy-now, pay-later services are increasingly being marketed by online retailers to consumers as a source of convenience – a way of getting hold of the goods before needing to pay, and a way of spreading the cost over instalments rather than paying one lump sum.
“While there's nothing intrinsically wrong with that, it's important to recognise that the main benefit to retailers of offering these services is to sell more of their goods than they otherwise might have done.
“The convenience to the consumer may be real – but so is the financial commitment. And that message might not be being given as much prominence.
“The principle that credit should be "bought, not sold" needs to apply just as much to these credit services as to any other loans or borrowing.
“If we want to reduce the risk of people inadvertently taking on unaffordable financial commitments, borrowing shouldn't just be a by-product of marketing to support the sale of retail products.”