NatWest is to join the booming but controversial “buy now, pay later” market this summer, becoming the first UK high street bank to announce a move into the multibillion-pound sector.
The bank is still majority taxpayer-owned – though only just, as the government stake is now about 51% – after a state bailout during the financial crisis. Its 18 million-plus customers may be surprised to learn it is to offer this form of unregulated credit, which lets people delay payment for items ranging from clothes to pet food.
However, NatWest said there was “a clear demand” for buy now, pay later (BNPL), and it was determined “to make it better and safer”.
BNPL lets shoppers stagger payments for goods with no interest or charges – unless they fail to pay back on time, at which point some firms impose late fees. Typically the cost is split into weekly, fortnightly or monthly instalments.
The three main BNPL firms are Klarna, Clearpay and Laybuy, and this form of credit has enjoyed explosive growth during the coronavirus pandemic, particularly among under-30s and those with tight finances.
NatWest is not the first UK bank to move into this sector: the online-only bank Monzo launched a BNPL product in September 2021. A year earlier, PayPal entered the market with its “Pay in 3” product. However, NatWest is the biggest UK household name to start offering this payment method and it has a huge customer base to market it to.
NatWest said it intended to launch its BNPL product this summer. The bank has not yet spelled out precisely how it will work, though it said that, as with the other schemes, it would split purchases into several repayments. It would also “give customers the convenience to make a purchase almost anywhere that accepts Mastercard” – meaning it will be available for both online and in-person purchases.
Like Monzo, NatWest will offer its customers a credit limit that they will know in advance, and those who take advantage of the service will be able to manage it within the bank’s app.
A NatWest spokesperson said transactions would be covered “by all the protections customers expect from a fully regulated bank”.
Many consumer bodies and politicians have expressed concern about the rapid rise of BNPL, with Which? magazine saying in January that stronger safeguards were needed to protect users because many people did not realize they were taking on debt.
In response to the concerns, the government has announced that BNPL is to be regulated by the Financial Conduct Authority, though the rules are unlikely to take effect until later this year or in 2023.