Two industry sources said the bank was working on a launch for the payment product, with an announcement expected as soon as next week. A spokesperson for Monzo declined to comment.
Monzo is set to be one of the first regulated banks to launch a version of BNPL. Barclays has announced plans to enter the market but the biggest players are financial technology companies like PayPal, Afterpay, Clearpay, and Klarna.
A source close to Monzo’s BNPL project said it would feature affordability checks for customers – something rivals generally do not require. Data will also be shared with credit checking agencies to give other lenders a full picture of people’s debt positions.
Buy now, pay later – shortened to BNPL – is in an alternative to credit cards that lets people spread the cost of purchases over several instalments. It was pioneered by Sweden’s Klarna and has grown rapidly over the last two years as more and more people shop online. The Financial Conduct Authority (FCA) estimates that 5m Brits used BNPL last year.
BNPL has become one of the hottest corners of global finance in recent months, with large financial firms throwing billions of pounds at the space as part of a race for market share. Square – the US payments company run by Twitter founder Jack Dorsey – last month paid $29bn for Australia’s Afterpay and PayPal this week announced a $2.7bn deal for Japan’s Paidy.
However, the market is controversial. Charity Citizens Advice has said BNPL could be “a slippery slope into debt” and Labour MP Stella Creasy has warned it could be “the next Wonga waiting to happen.” The FCA has called for “urgent” regulation of the space.
BNPL companies argue they are offering a cheaper alternative to payday loans and credit cards. BNPL providers generally do not charge interest or fees so long as people meet all their repayments on time. Monzo’s extra checks could go some way to addressing critic’s concerns.