About three months ago, Frederique Vlaeminck (19) had a practical problem. “I wanted to buy a birthday present for a friend, but had yet to get my pocket money for that month.”
A problem that was solved by Klarna, perhaps the most used post-payment service in our country. ‘Buy now, pay later’ is the motto of such services and covers everything completely. They act as an intermediary and advance the amount to the distributor of the package. The buyer receives a package at home and can pay that amount two weeks or a month later – sometimes in installments – without interest. Buy on the poofSo.
This offers advantages to users, if only it means less hassle if something has to be returned. “I find it especially useful to buy clothes,” says Emma Decuypere (21). “This way I can try on a piece of clothing. If it’s not for me, I can return it and no money will actually ever leave my account.”
Decuypere and Vlaeminck fully meet the profile of people who prefer post-payment. About 18 percent of Belgians use such services, according to a new study by the Belgian Association for Research and Expertise for Consumer Organizations (BV-OECO) and research agency Ipsos.
About 40 percent of postpayers are younger than 34 years old, and about 20 percent are between 16 and 24 years old. The vast majority (62 percent) buy clothes with it, followed by electronic products (21 percent) and health products (18 percent).
Many organizations feel that purchasing on credit is on the rise. TestAankoop, for example, receives more questions about this. Internationally it is gradually becoming big business. Market leaders Klarna, Afterpay, Scalapay and PayPal together earned 90 billion dollars (approximately 84 billion euros) in 2021. Klarna would even hope to raise 20 billion dollars (more than 18 billion euros) in an American IPO, Bloomberg news agency wrote in February.
Pitfalls
Although there are also potential pitfalls associated with post-payment services. Recently, the Dutch Financial Markets Authority (AFM) warned that many minors were using post-payment services – which is actually not allowed and according to Klarna, for example, is officially not possible. AFM is also “seriously concerned” about the debts that they, and de facto their parents, may accumulate.
This concern also exists in Flanders. The Support Center for People and Society (SAM) received signals from recognized institutions that provide debt mediation that some young people had run into financial problems through such repayment services.
The BV-OECO survey shows that arrears are a more important source of debt among young people than among older age groups. About 25 percent of 16 to 24-year-olds and 32.5 percent of 25 to 34-year-olds say they have already come into contact with a debt collection agency after they were unable to repay an amount through a post-payment service. That is more than double the number of young people (10 percent and 7.4 percent respectively) who had to deal with a debt collection agency for another reason.
That worries experts. Post-payment services deliberately remove a barrier. “We know from research that users buy more than if they pay immediately,” says Nele Peeters, researcher at Thomas More’s Budget and Financial Welfare Expertise Center.
Emma Decuypere does not have a shopping addiction. However, she readily admits that post-payment has made her order more via the internet. “I’ve known Klarna for three months now,” she says. “During that time I ordered about thirty items of clothing. That’s a lot more than I used to do.”
Klarna, which is perhaps the largest post-payment service in our country, said in a response that it “checks a customer’s creditworthiness before every purchase” and tries to prevent customers from ending up in a debt spiral. If they miss a payment, the company says it won’t allow another payment until the previous one is repaid.
European rules
A new European directive should offer users more protection. Our country gives people who take out a loan quite a bit of protection compared to other European countries. But both the amounts, often less than 200 euros, and the terms within which repayment must be made, less than two months, mean that this protection does not yet apply to users of these services.
A new European directive solves that problem. But this still needs to be transposed into national law, which may not happen until 2026. “We ask the government to fully and quickly implement these regulations,” says Leen De Cort, general secretary at BV-OECO.
“According to our figures, clothing is currently mainly purchased via pay later applications. It is important to continue to monitor these trends. In some countries we see that consumers are also more likely to purchase essential services through such applications.”
In addition, BV-OECO calls for more attention to financial education at school. That also seems like a good idea to Peeters. “Parents also need to educate their children about this,” she says. “But we cannot expect that every parent is equally good at it.”
