Laura Whateley, consumer guru at The Times, this week published a really insightful piece around a new trend that is developing in China – ‘eat now, pay later’. Basically, this translates to (mainly) young people buying their hamburgers and fries via short-term loans, and paying for them in bitesize (pardon the pun) instalments long after the taste of the burger relish has gone. Now, Laybuy is a company that provides almost exactly this service – the opportunity to buy products and pay for them over six weekly, albeit interest free, instalments. Yet this article gave me pause. Why? Because allowing people to ‘eat now, pay later’ is actually kind of the opposite of the service we are trying to provide through Laybuy.
Let me explain. The idea of Laybuy was conceived through my own experience of being a young person, a student and meeting the financial challenges that come as part and parcel of that time of our lives. As a Millennial, I’d seen first-hand the horrors of 2008’s recession and had my eyes fully open to the dangers of risky credit and store card debt. I didn’t (and still don’t) possess either one of these, but this didn’t mean that there was never a need, and yes sometimes a want, to buy higher price items. The tent I needed for a camping trip. The insane number of books I needed for my uni course. And yes the new pair of sneakers that I perhaps wanted more than needed. Unfortunately, when you’re living off a student loan, your finances don’t really stretch to one off big ticket items like this. So it’s either bank of mum or dad, or nothing. The idea behind Laybuy is to give people another choice of how to pay for higher price items without getting into risky debt – whether it’s the mother buying new school coats, the cycling enthusiast desperately needing a new bike, or the student who wants some Converse that are actually still white!
On the other hand, what Laybuy was absolutely never intended for, nor set up to facilitate, is to allow people to live perpetually beyond their means – and ‘eat now, pay later’ screams of this. There is a danger when people start using any sort of credit as a part of their day-to-day spending. It’s fine to want to make an aspirational purchase every now and again and to find a way to do this more affordably, but no credit agreement should constitute a regular supplement to a ‘hand to mouth’ lifestyle. This is when debt starts to spiral out of control.
At the heart of this topic sits the morality and responsibility of the lender – this is true of any company that offers credit. It’s important to give people options, but to be as rigorous as possible in deciding to whom, at what level, and when it is appropriate to do so. At Laybuy, we partner with Experian, and we consider this a crucial part of our offering. Not only does Laybuy perform a credit-check before offering customers the opportunity to purchase via the platform, but it also helps those not engaged in riskier lending options such as credit and store cards to have the opportunity to build a credit score. This could be vital for when these cautious borrowers are seeking, for example, a lender willing to furnish them with a mortgage.
So what’s the bottom line? Should credit of any type be offered to people who can’t afford to make repayments? Absolutely not. Should credit be used as a supplementary income month to month? I believe it is highly dangerous to think of any loan in this way. But should responsible borrowers who don’t want to dabble in credit cards be denied a more affordable way to make higher ticket purchases and boost their credit score in the meantime? I definitively believe they should, and hope that Laybuy gives people the opportunity to do so.
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