Britons now have the option of using buy now, pay later when shopping on Amazon’s website, following a partnership between the retail giant and Barclays Bank.
The new flexible payment method, Instalments by Barclays, will enable Amazon shoppers to finance purchases of £100 of more via their account.
The buy now, pay later credit can be used on millions of items, including those from thousands of small and medium sized businesses selling on Amazon.
The UK is the second country where Barclays and Amazon are working together to offer reusable credit accounts after last year
BNPL schemes like this one enable shoppers to pay for goods in instalments after purchasing an item, often using informal credit agreements.
An increasing number of Britons have used BNPL schemes during the pandemic as people turned to online shopping during successive lockdowns.
Spending made through such payment methods more than tripled between January and December last year.
And a record 28 per cent of Britons made at least one BNPL repayment in October this year according to Equifax, up from 23 per cent in December 2020.
At present, the sector is dominated by three main players, Klarna, Clearplay and Laybuy – Klarna being the biggest with more than 13million shoppers spending £2.7billion a year in the UK.
Barclays will charge a 10.9 per cent APR on the BNPL purchases, although promotional rates and interest-free financing may be available at certain times.
The move by Barclays is being seen by some as an early sign that banks will be prepared to offer BNPL services with others likely to follow suit.
Andrew Hagger, personal finance expert and founder of Moneycomms said: ‘I think the big banks want a piece of the BNPL action and to fight back against the likes of Klarna which will have taken a fair slice of its business over the last couple of years.
‘The Barclays deal is like having an online Amazon store card with a pre agreed interest rate and credit limit agreed at the outset.
‘We may see similar tie-ups next year as BNPL seems to be becoming an increasing threat to established credit card businesses.’
What does it mean for Amazon shoppers?
Instalments by Barclays, will allow Amazon shoppers to spread the cost of their bigger purchases (in excess of £100) across three to 48 months, although the minimum monthly payment allowable is £15.
Barclays will also charge 10.9 per cent APR on these purchases, although promotional rates and interest-free financing may be available at certain times.
APR is the annual percentage rate, which is the total amount you’re charged for your finance over the year.
This means, someone financing the cost of a £599 TV on amazon via Instalments over a 12 month period, could expect to pay a total of £634.95 after the 10.9 per cent APR has been added.
The bank claims there are no account management fees, late fees, statement fees, or other hidden fees.
Ruchir Rodrigues, head of Barclays Cubed & Consumer Bank Europe, said: ‘This is another major step in our ambition to reinvent payments at the point-of-sale and delight customers.
‘Amazon offers a world-class shopping experience, and this new service gives users a fully reusable payment-by-instalments option, which they can use to spread the cost of purchases over a longer period.’
How does it work?
After adding eligible items to their basket, shoppers will be able to change the payment method from their credit or debit card to ‘Instalments by Barclays’ and click to apply.
They will then be redirected to a Barclays application form to enter their personal information and the bank account they wish to cover the monthly costs with.
In most cases, shoppers will receive an immediate response from Barclays letting them know whether they’ve been approved, and setting out their spending limits.
Barclays will calculate a personal credit limit and monthly payment limit and decide if the repayments are affordable for each shopper.
If accepted, shoppers can make repeat purchases with their credit account without needing to reapply, albeit whilst staying within their credit limit and monthly payment limit set by Barclays.
The credit limit is the most they can spend in total via their instalments account.
Barclays will calculate a personal credit limit and monthly payment limit and decide if the repayments are affordable for each person who applies.
The monthly payment limit is the total amount their payments can add up to across all their BNPL purchases.
However, as shoppers pay off their plans, they’ll free up credit, which they can then spend again.
It’s worth noting that shoppers will not be able to use this service to buy groceries, gift cards or subscriptions, or pre-order, digital, non-tangible or out-of-stock items.
BNPL currently remains unregulated in the UK, but in late October, the Treasury opened a consultation that runs until next month on how it will be regulated in the future.
It comes as Britons are set to spend £1.3billion this Christmas using buy now pay later with nearly three in ten households expecting to rely on them, according to a study by Scottish Friendly.
A similar number said the rising cost of living means they are more dependent on using BNPL to make Christmas-related purchases than they would like.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.