Oliver Crawford

By Oliver Crawford

'Buy now pay later' (BNPL) schemes have grown greatly in popularity since 2020 and are now a familiar sight at online checkouts. As a form of borrowing, they tend to be easier to use than credit cards, since they normally do not require a hard credit check. They also generally don't charge interest, though some providers do charge fees for late repayment.

There are drawbacks to using BNPL, however. First, unlike with a credit card, customers do not have Section 75 protection on purchases. This makes it harder to claim refunds on purchases of over £100. Second, because BNPL is not currently regulated as a sector, BNPL customers have no recourse to the Financial Ombudsman Service (FOS), unlike credit card users.

Given these shortcomings, you might expect credit card providers to be more trusted than BNPL providers. Our recent polling data, however, shows that customers have similar levels of trust in BNPL and credit card providers. Where a divergence emerges is among young people, aged 18-30, who trust BNPL providers more.

In fact, Klarna, PayPal and Clearpay - three of the largest BNPL providers in the UK - perform comparatively well in terms of customer trust, despite being unheard of only a few years ago.

Although some credit card providers, such as First Direct, John Lewis and American Express, perform better on trust than the BNPL schemes, it is notable that Klarna, PayPal and Clearpay all score higher on trust than established banks such as Lloyds, Halifax, NatWest, Barclaycard, HSBC and TSB. They are also more trusted than credit card providers which focus on customers with poor credit, such as Capital One, Vanquis and Aqua

These data suggest that BNPL schemes, though relatively new, are succeeding in winning the trust of customers - especially young customers. Credit card providers will have to rise to this challenge, or they risk losing an important share of the consumer credit market.

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