Zopa set to launch buy now, pay later credit

Digital bank Zopa has revealed it will start to offer pay-later options for big ticket items.

The era of “BNPL 2.0” is coming with the launch of new credit deals, digital bank Zopa has announced.

The news of Zopa’s plans came after Apple announced its own plans to launch a buy now, pay later (BNPL) credit service, initially in the US.

Zopa, a UK challenger bank which began as a peer-to-peer lender, said its BNPL credit would be for items costing between £250 and £30,000 but it has yet to share details about repayment periods, and whether there are any late fees or interest charges.

The move is a challenge to BNPL giants Klarna and Clearpay, which have millions of customers in the UK, but these companies offer BNPL for items costing far less than Zopa’s £250 minimum.

Credit checks

Acceptance for Zopa’s deals will be subject to credit checks and affordability assessments and Zopa will share customers’ data with credit reference agencies, so it will be visible to other potential lenders.

Credit reference agencies are currently working on how to incorporate BNPL transaction and repayments data into credit scores. Since 1 June, Klarna has been sharing this data with 2 credit reference agencies.

The UK watchdog, the Financial Conduct Authority, is working on plans to regulate the BNPL sector, following criticism over consumers taking on too much debt through BNPL deals.

BNPL 2.0

Tim Waterman, chief commercial officer at Zopa, said: “Zopa is ushering in the era of BNPL 2.0, an evolution of BNPL that is regulated. We combine the seamless customer journeys and best-in-class digital UX offered by traditional BNPL players alongside the ability to underwrite longer, larger loans in a way that fully meets regulatory requirements.”

Zopa says it will first launch a BNPL deal that stores will be able to offer as partners. The second phase – once the sector becomes regulated – will see Zopa offer a deal directly to consumers.

What is buy now, pay later and how does it work?

BNPL is a short-term payment service which allows you to spread the cost of your purchases by paying later and typically in instalments. Read more on BNPL in our guide.

If you are planning to use a BNPL service or are currently using one, there are a few things you need to know. Earlier this year, all 3 major credit reference agencies in the UK announced that reported BNPL data will show up on your credit report.

Any late or missed payments that are reported could therefore impact lenders’ decisions to give you further credit or offer good rates. Repaying on time could have a positive effect, though.

Finder has asked Zopa to confirm which CRAs it will be reporting data to.