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The “Shop today, pay later” model is becoming increasingly popular in Switzerland. But consumer advocates don’t think much of it.
Anyone who makes use of offers known as “Buy now, pay later” should definitely make sure that deferring payment or purchasing in installments does not involve any additional costs. (Symbolic image) – Christin Klose/dpa-tmn
When hunting for bargains, many consumers find their fingers sore while shopping online in the days surrounding the Black Friday discount battle. The “shopping euphoria” can sometimes be followed by a “credit hangover” due to new payment options.
In contrast to credit cards, for example, “Buy now pay later” (BNPL) is based on the approach where a retailer advertises a product through a third-party provider using installment payments. Credit card providers usually charge higher interest on amounts due, but offer more flexible repayment options. With BNPL providers such as Klarna or CembraPay (formerly Byjuno), installment payments are usually automated.
Experts estimate the market share in Switzerland to be between 1 and 5 billion francs per year. For comparison: According to the Swiss Payment Association (SPA), there are around 8.5 million credit cards in circulation in Switzerland. Swiss retail generates an annual turnover of 32 billion francs. BNPL offers are still a niche market.
BNPL is growing particularly among young buyers
However, according to the retail report from the payment service provider Adyen, BNPL is enjoying increasing popularity in Germany and Great Britain and especially in the USA. Younger customers in particular often buy on credit. With partly questionable consequences: According to figures from Creditreform, over-indebtedness in Germany only increased last year in the 18 to 30 age group.
BNPL is therefore often considered the “problem child” of payment transactions and regularly attracts criticism from associations and consumer advocates: “In principle, it makes sense to only pay when you have received the goods,” advises the Swiss Consumer Protection Foundation Customers.
“The merchant is charged fees for BNPL”
“But if the company works with payment processors such as Klarna or CembraPay, purchasing on account carries some risks and can become a debt trap,” says Livia Kunz, Head of Legal at Consumer Protection.
It is generally recommended that when purchasing on account, the amount is paid “on time” and “at once”. It is not advisable to agree to payment agreements in installments.
In addition, when “purchasing on account with a subsequent offer to pay in installments”, the entire amount is generally owed at once. There is therefore a lack of protective mechanisms to prevent indebtedness, says Kunz.
BNPL is not yet a success in Switzerland
The fact that BNPL is not yet a resounding success in Switzerland is probably also due to the merchants themselves, as Severin Pflüger, managing director of the Association of Electronic Payments (VEZ), explains when asked: “Because the merchant is charged fees for BNPL.”
However, many are not prepared to forego a margin for another means of payment: “Retailers distrust the BNPL providers’ argument that this margin reduction will be compensated for by an increase in volume,” says Pflüger. The Swiss market of BNPL providers such as Swissbilling and Byjuno is nevertheless experiencing high growth.
For example, Cembra Money Bank, which specializes in loans, shows in its half-yearly report that net receivables from customers in the BNPL sector grew by 12 percent compared to the previous half year. When it comes to credit cards, net receivables from customers increased by “only” 3 percent, but the total amount amounts to 1.1 billion francs. At BNPL it is just 0.2 billion.
What role should financial literacy education play in helping consumers make informed decisions about using BNPL services?
## BNPL – A Devil in Disguise or a Helpful Tool? Interview Discussion Guide
This discussion guide is designed to explore the complex world of Buy Now Pay Later (BNPL) offerings, encouraging critical thinking and diverse perspectives on its impact on consumers, merchants, and the financial landscape.
**Section 1: Understanding BNPL and its Rise**
* What are your initial thoughts and feelings about Buy Now Pay Later schemes?
* The article mentions BNPL witnessing significant growth in certain countries but remaining a niche market in Switzerland. What factors might contribute to these differing trends?
* How do you think social media and online shopping culture play a role in the popularity of BNPL, especially amongst younger generations?
**Section 2: The Pros and Cons of BNPL**
* What are the potential benefits of using BNPL for consumers?
* What are the potential risks associated with BNPL, and how can consumers avoid falling into a “debt trap”?
* Do you think BNPL providers adequately disclose the terms and conditions of their services to consumers? How can transparency be improved?
**Section 3: Regulation and Responsibility**
* Should BNPL services be subject to stricter regulations? What kind of regulations would be beneficial?
* Who bears the responsibility for responsible use of BNPL – the provider, the consumer, or both?
* Do you think BNPL promotes impulsive buying and overspending?
**Section 4: The Future of BNPL**
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How do you see the BNPL market evolving in the future? What role will it play in the financial landscape?
* What innovations or changes do you foresee happening in the BNPL industry?
* Do you think BNPL will eventually replace traditional credit cards?
**Section 5: Personal Experiences and Opinions**
* Have you ever used a BNPL service? What was your experience like?
* Would you recommend BNPL to others?
* What advice would you give someone considering using BNPL for the first time?
This discussion guide aims to spark thoughtful conversation and encourage participants to consider the multifaceted implications of BNPL within the greater context of consumer finance and responsible spending.
