UK-based digital banking platform Monzo, which is under investigation for possible money laundering activity and posted £130m in losses, is reportedly planning to enter the fast-evolving Buy Now, Pay Later (BNPL) sector.
As first reported by the Evening Standard, two different sources noted that the virtual bank has been focused on introducing its pay over time product, with a formal announcement expected soon.
Monzo is reportedly set to become one of the first regulated banking platforms to offer a BNPL solution. Barclays has unveiled plans to enter the fast-growing pay later market, however, the largest platforms in this controversial space are Fintechs such as Afterpay, Clearpay, Klarna, PayPal, among many others.
A source familiar with Monzo’s BNPL plans stated that the Fintech firm will provide affordability checks for clients, which is something that competitors may not be requiring at this time. Additionally, relevant data will be provided to credit checking firms, in order to give other lending platforms an accurate view of consumers’ debt/financial status.
BNPL has emerged as a popular alternative to traditional credit cards. The flexible payment method allows consumers to spread the cost of purchases over multiple installments, which can make it more practical to complete payments.
Sweden’s Klarna is well-known for being a pioneer in the BNPL market. The Fintech company has grown its operations during the past couple of years as more consumers start engaging with digital commerce platforms. The Financial Conduct Authority (FCA) reports that around 5 million UK residents used some type of BNPL service during 2020.
BNPL has notably become one of the fastest-growing finance and Fintech segments, globally. Major financial companies have allocated substantial capital to this sector. Payments giant Square recently acquired Australia-based BNPL Fintech Afterpay for $29 billion, meanwhile, PayPal finalized a $2.7 billion acquisition of Japanese pay later Fintech Paidy.
But this nascent market has been scrutinized for poor management practices and not ensuring adequate consumer protection. Charity Citizens Advice reports that BNPL may be considered a “slippery slope” into major debt.