Fintech unicorn Revolut has announced it plans to launch a buy now pay later feature to compete with the likes of Klarna, Clearpay and other payment giants.
The UK based company is developing a series of products that will allow its users to spread the cost of in-store and online purchases over a set period of time. These products are currently in early development and are expected to be trialled in Europe next year.
Nikolay Storonsky, Revolut CEO, told the Evening Standard that the product will be “Simply a button which you switch on and then your card becomes a buy now pay later product. Instead of paying upfront everything, you pay a third and then in two weeks time we charge you a third and then another third.”
Revolut’s plan to enter the competitive market comes after it became Britains most valuable private tech company in history, with investors valuing the business at $33billion as part of an $800million funding round in July.
“For Revolut to succeed in such a crowded market, it’s going to have to offer something most of its peers don’t — that could be enabling users to convert purchases made using Revolut to instalment payments at a later point, for example,” said Sarah Kocianski, a strategist at Founders Factory.
Buy Now Pay Later
Buy now pay later, or BNPL, has received a lot of attention recently, both within the fintech community as well as out in the wider media. The payment method was originally launched by Klarna which was founded in 2005, and has boomed in usage since.
Fuelled in part by the Covid-19 pandemic, BNPL products are a major payment method, with around 5 million people in Britain using BNPL since the start of the pandemic, with the UK market itself quadrupling last year to reach £2.7 billion.
However, with this increase in use, some are concerned that consumers are at risk of experiencing negative side effects of such products, for example getting into debt and spending money they don’t have.
Minck Hermans, Co-founder and CEO at borofree said: “What I feel is one of the key issues with buy now pay later is that people don’t really have the idea that they’re spending money. The customer journey has almost detached itself completely from the fact that you’re actually spending your money and could even be spending money that you don’t have that you have to pay back later.”
The Revolut announcement also comes in the wake of an FCA report published earlier this year, that advised there was “a significant potential [for] consumer harm” when it came to BNPL, calling for stricter regulation.