Major high street bank with 18million customers AXES popular payment method

A HIGH street bank is getting rid of a popular payment method for customers in the spring.

Natwest is preparing to axe its Buy Now, Pay Later (BNPL) option less than two years after launching it, The Sun can reveal.

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It is understood the bank will begin closing BNPL customers’ accounts from May 7 this year.

Natwest launched its BNPL product to much fanfare in the summer of 2022. But it’s understood to be ditching it due to lower than expected use.

BNPL products allow shoppers to defer or spread the cost of purchases over a set time frame and usually interest-free.

The payment method is used by millions of Brits every year, and Citizens Advice estimated around 15.1 million people relied on BNPL plans over the Christmas period.

BNPL is widely available as a payment option at the online checkout of high street clothing stores like H&M, as well as furniture retailers such as Argos.

Natwest’s BNPL product, offered via its “Virtual Credit Card“, allowed customers to pay off purchases with no interest over four monthly instalments.

Or they could spread the cost over an even longer period for a fee.

When it first announced the product in March 2022, Natwest said there was a “clear demand” for BNPL and that it was determined “to make it safer and better”.

It is understood the bank wanted to test whether there was demand for a product which automatically put every purchase onto an instalment plan, without having to request one.

However, The Sun understands the payment method hasn’t been as popular as anticipated, with existing options such as Natwest’s “instalment plan” for credit card users remaining more popular.

This instalment plan allows credit card customers to pay certain purchases back over instalments of three, six, 12 or 24 months.

With a credit card, you usually pay off all or part of the outstanding balance each month, including interest.

Customers can also move the balance of expired 0% balance transfer cards over to one of these instalment plans.

The main difference between this and the BNPL product is that customers can switch on instalment plans if required for up to five eligible transactions, whereas the BNPL plan automatically put all purchases onto instalment plans.

While the BNPL product was available for all of Natwest’s 18million existing customers, it’s understood the actual number of people who used it was far smaller.

A spokesperson for Natwest told The Sun: “We are focusing on our core lending products, helping customers spread the cost of their purchases through our credit cards, overdrafts and loans.

“This means our Buy Now Pay Later proposition will be closing.”

Customers who have active plans have been contacted over the past week to inform them the service will be shutting down.

Their accounts will be closed once their repayment periods come to an end, so customers don’t need to do anything – but customers can contact Natwest with any concerns.

The closure of the product comes after we revealed in January that the Treasury is delaying plans to regulate the BNPL sector over concerns it will cause some firms to ditch the UK market.

Sources in discussions with the Treasury told The Sun at the time that this is a major concern for the government as it doesn’t want to restrict the number of BNPL products on offer during a cost of living crisis.

Millions of people use these products every year, although they are not currently regulated by the City watchdog, the FCA, which means customers aren’t covered by the same protections as other credit agreements.

For example, customers who use unregulated financial products don’t have access to the Financial Ombudsman Service, which settles complaints between consumers and companies.

BNPL products are also not covered by Section 75 protection, where you can claim a refund if something goes wrong like with credit cards.

Plans were announced to regulate BNPL in 2021 but discussions have been dragging along while the government works around how to introduce regulation without putting off both firms and shoppers.

Last year, we revealed Klarna, a major BNPL provider, was closing down its regulated credit product used by around 90,000 customers.

What alternatives are on offer?

While Natwest’s product is closing, there are a number of BNPL products that provide a similar offering.

Last month Amex launched its Plan It BNPL scheme in the UK, allowing cardholders to pay for purchases in instalments over three, six or 12 months with no interest.

However, the plan does come with small fees, so it’s worth weighing up the fees vs the interest without an instalment plan.

Amex has a calculator on its website where you can compare the Plan It fees vs regular interest fees at americanexpress.com/en-gb/benefits/plan-it/.

Monzo Flex also lets you spread purchases over three monthly payments interest-free. If you need more time, you can extend the repayment period to six or 12 months, but with interest added.

There are also a number of dedicated BNPL providers like Klarna, which offers a “Pay in Three” product, where customers can pay for a purchase in three interest-free monthly payments.

Natwest customers can instead use the bank’s instalment plans if they get a credit card.

HSBC has also offered a similar option for credit card customers since July 2021. It allows them to convert a purchase into an interest-free instalment plan.

If you can afford to pay off your balance every month, a regular credit card is also a good option.

Having a credit card that you pay off on time can improve your credit score, which helps future lending such as applying for a mortgage or getting another loan.

How to use BNPL safely

When used correctly, Buy Now, Pay Later plans can be a useful way of managing your finances.

However, research has shown many Brits have become over-reliant on the products and are struggling to keep up with repayments.

Laura Suter, director of personal finance at broker AJ Bell, says the main issue is that you can end up juggling lots of different payment dates with different providers, and if you miss a payment you’ll end up with late fees and a bad credit score.

“Make sure you put a note in your calendar of when you’re due to make a payment to check you have enough money in your account to pay it – and that the payment goes through,” she says.

“Remember BNPL is still debt – so don’t spend money you can’t afford to repay. If you wouldn’t put it on a credit card, don’t use a BNPL product.

“Also, don’t assume that BNPL is the cheapest and best option for you.

“Weigh it up against a 0% credit card or 0% overdraft and see which would work best.”

This post first appeared on thesun.co.uk