Buy now, pay later services like Klarna and Clearpay see decline among gen Zers
During the COVID-19 pandemic buy now, pay later (BNPL) firms such as Klarna and Clearpay skyrocketed in popularity as gen Zers felt the hard-hitting financial losses of the world shutting down. Normal hospitality or retail jobs, which they’d relied on to see them through university were no longer an option, but that didn’t mean we didn’t want to treat ourselves to a cheeky haul every so often. BNPL provided a bit of financial relief to get us through those tough times.
But how does it work exactly? BNPL schemes are essentially a form of credit without the scary adulting checks that, let’s face it, in a cost of living crisis most gen Zers, myself included, would have no chance of passing. When buying through a site such as Klarna, shoppers can pay for a product in three instalments seemingly with zero interest. Now, if that statement in and of itself makes you feel little a nervous inside, I don’t blame you.
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Some gen Zers are eating up what BNPL has to offer, including SCREENSHOT’s very own Social Media Executive, Naima Collier. Self-proclaimed “credit babe,” Collier has even figured out a hack to make the most out of Klarna and use it to pay for her flights.
Collier confessed about her addiction and told us: “I think Klarna is great because it allows me to get more stuff than I could afford if I paid in full straight away and if I pay 30 days later it feels free!”
While my own financially anxious brain could never follow Collier’s lead, I do admire her confidence in the scheme. She continued: “I know Klarna probably doesn’t have the best effect on my credit, but I always make my payments on time or contact them if I’m having financial difficulties. Quite frankly, I’m 24 years old and probably won’t be getting a mortgage any time soon so I’ll cross that bridge when I’m 30!”
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I, on the other hand, am quite literally terrified of BNPL. When it first became popular, I’ll admit the attraction was there, and my younger self who’d set up camp in her overdraft during university did fall into the trap. It was the start of summer and I was holiday shopping, so I chose to Klarna some bikinis so that I could save some pocket money for the actual trip. However, after a couple of days without sleep, thinking the bailiffs were coming for me, I ended up paying back the total amount in three days rather than three months. The pressure just got to me.
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BNPL is also intrinsically tied to the fast fashion boom. PrettyLittleThing, ASOS, and Boohoo were some of the first brands to partner with the payment plan. These fast fashion giants are already relatively cheap, so the BNPL payment service encouraged mass hauls for clothes that are already produced in bulk. This in turn leads to more clothes in landfills, so not only does the BNPL service cause financial losses but it also directly contributes to the climate crisis. At this point, my anxiety is through the roof.
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We asked Collier how much she owed Klarna after catching flights not feelings, and it came to a total of £892. I, on the other hand, don’t owe anyone anything. That being said, I don’t have as many holibobs or nice clothes to look forward to as Collier does, so who’s the real winner?
Using BNPL could lead to late fees, the extent of which is unclear on the platforms’ websites. A big red flag on your credit score could potentially lead to rejection from your bank when applying for loans or mortgages, and finally, you could be referred to debt collectors. This all sounds like my worst nightmare.
In 2022, the government finally recognised the dangers of BNPL, particularly for us gen Zers, after consumer bodies called for stronger safeguarding of BNPL. So, what is the government going to do to help people like Collier? First, affordability checks will be much more regimented, followed by making the hidden policies and small print easier to get a hold of and understand. Hopefully, gen Z will get a better idea of what they are buying into, or not buying, should I say.
A year later, these measures have been put in place but are gen Z finally relinquishing the hold BNPL has over them? Collier is very much a slave to the system but for the most part, according to Business of Fashion, gen Z are using BNPL less for investment pieces and more for everyday purchases. Monzo even lets gen Z use their own BNPL scheme for any purchase no matter the cost. Has the cozzie livs really got us buying Tesco meal deals in three instalments?
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That being said, as we’re using it for smaller, less significant, and anxiety-inducing purchases, could BNPL be dying out? Essentially, gen Z is growing up and with much reluctance starting to realise the importance of adulting. BNPL isn’t just Monopoly money that can be thrown out the window on your latest indulgence, it can come with some severe financial consequences and lead to spiralling debt. What do you want your future to look like?
