Tuesday 13 October 2020 4:30 am

Christmas isn’t cancelled — Santa is accepting buy now, pay later

Andrew Busby is founder of Retail Reflections and an author

One thing’s for sure: we’re going to be tempted to spend more than ever this Christmas, because 2020 has not been a joyful year. 

Let’s face it, if 2020 were a wine, it would be reduced to being a bin-end, and a pretty poor one at that.

But as furlough unwinds, and with a no-deal Brexit looming, many cash-strapped Brits will be wondering how on earth they’re going to afford to splash out on their loved ones, even if the government does allow us to celebrate Christmas as usual.

Read more: Why Klarna — not Revolut or Monzo — represents the winning fintech strategy in a pandemic

Hope may be on hand in the form of something which in the past has had its fair share of critics: the buy now, pay later model.  

It’s credit, but not as we know it. Put aside preconceptions about loan sharks and predatory pay-day lenders — the fintech companies which provide it maintain that allowing consumers to spread the cost of anything from a pair of shoes to a holiday over a fixed period represents responsible lending.

And it can certainly prove to be a lifeline. We’ve all been there: an unexpected — and therefore unbudgeted — bill such as the car breaking down, or needing a new washing machine or TV.  All big-ticket items which make a large dent in our monthly household budget. Spreading the cost over multiple weeks or months can make impossible purchases manageable, and the more uncertain the economy, the more demand there is for such services.

The New Zealand firm Laybuy is one such company which is now focusing on the UK market. Its recent initial public offering in Australia raised $58m, demonstrating the attractiveness of the buy now, pay later sector among investors, especially during the pandemic.

Speaking to Reuters in early September, co-founder and managing director Gary Rohloff was optimistic about the opportunity for UK growth: “I think the reality is in the UK, there are only three players, and Laybuy is one of them.”

With established players such as Klarna already with a strong foothold in the UK market, you’d be forgiven for thinking this a tad over-confident. But the reality is that the growth of the buy now, pay later model only looks set to continue. 

It has, it’s true, drawn the attention of the Financial Conduct Authority (FCA), which recently announced a crackdown as part of an inquiry into the lending practices in the unsecured credit market. But unlike some of its rivals, Laybuy conducts credit checks before allowing potential customers to use its services, thus presenting itself as a safer bet for both investors and the regulators. 

And besides, the FCA scrutiny is unlikely to dampen the enthusiasm of consumers as the busiest time of the retail year rapidly approaches. Because with all the sacrifices and hardship people have had to endure over the last six months, the last thing on their minds will be cancelling Christmas.

This year perhaps more than most, we all need a little reward. And as we all feel budget pinches, the trend towards using the buy now, pay later model could prove to be Santa’s little helper.

Read more: Coronavirus: Boris Johnson says it’ll be a bumpy road until Christmas, as new Covid-19 cases top 10,000

Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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