Virgin will offer a credit card that allows customers to spread repayments over a few months, with instalment fees added if they repay in nine months or longer.
The new offering has been developed in partnership with Mastercard and TSYS, with Gen Z customers in mind. Customers can use Slyce for all their BNPL spending by splitting any monthly spend over GBP 30 across three, six, nine or twelve months to suit their needs.
Virgin Money Slyce, which is fully regulated, can also be used to build credit scores and spend in different currencies abroad with no foreign exchange fee or extra charges. The spending can be tracked via the Virgin Money Credit Card app.
Virgin Money said it will carry out affordability and credit worthiness before any spending starts.
There are currently 35 million active credit cards in the UK, according to Statista, with GBP 16.2 billion spent in January 2022 alone. BNPL, on the other hand, was used at least once by around 15 million people, or around 28% of the adult population in October 2021, according to Equifax, with the average user repaying GBP 125.32. That suggests overall BNPL lending is around one-tenth that on credit cards.
BNPL offers a range of advantages. Card providers which have big economies of scale charge retailers under 2% for the credit service. BNPL can demand more than twice as much.
Besides, BNPL boosts sales when compared with other payment options. Bain says that around 57% of merchants see an increase in ‘basket conversion’ and about 46% experienced an increase in order value.
BNPL products have soared in popularity in recent years with customers buying anything from clothes to electronic gadgets. The products have attracted criticism from lawmakers and watchdogs over the sometimes high rates of interest charged.
Therefore, the Government of the United Kingdom has announced in June 2022 a new regulation to protect millions from the potentially negative aspects of local BNPL service providers. As per the new legislation proposals, lenders will be required to ensure loans are affordable and rules will be amended so that all advertisements are fair, clear, and transparent.
Concerns over the BNPL model centre on whether users understand that they are taking on debt, and if providers are ensuring people are able to afford the products they purchase using the service.
The government is expected to publish a consultation on the draft legislation towards the end of 2022 and aimed to lay secondary legislation by the middle of 2023.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now