Cost of “traditional” credit puts UK consumers at risk
Klarna, a global banking, payments, and shopping service, has released its latest Shopping and Money Management trend reports.
The quarterly global Pulse reports highlight consumers’ difficulty to understand the costs of using “traditional” payment methods, such as credit cards, and their overall shopping and money management behaviour.
Although consumers may have missed the social aspects of shopping in-store and being able to touch new products, the trend towards online shopping under lockdown looks set to stay. In the UK almost half (48%) of consumers shop online at least once a week, up 26% from Q1, leading to a shift away from cash and towards credit and debit cards, and other alternative payment methods.
The report highlights the challenges consumers face when it comes to using credit cards, after this shift towards online payments. Over a quarter (26%) of Brits do not know how much interest their credit card charges, 15% only pay off the minimum amount each month and 23% have incurred unexpected credit card costs.
The majority of UK consumers (66%) own at least one credit card, with 23% of them using it as their main card for purchases and 43% for emergencies or sporadic high ticket purchases. However, almost two-thirds (59%) would rather go to the dentist or do household chores than read their credit card’s fine print or work out the cost of its APR.
Buy now pay later
Buy Now Pay Later (BNPL) is a type of credit where you can make a purchase and pay for it at a later date. The report found that a quarter (26%) of UK consumers have used BNPL, enabling them to defer payments or pay in installments.
The majority of consumers use BNPL because they want to offset the risks of online shopping - which is set to increase in the future. Almost 4 in 10 (37%) feel shopping online can be risky. In fact, more than 6 in 10 (62%) of those who use BNPL said that the main benefit of paying after delivery is to be able to check a product before paying, while almost half (45%) of BNPL users said paying only for the products they keep was one of the main benefits.
Interestingly, the research also found that while most people have heard of BNPL (85%), only a quarter (26%) have actually used it, explaining the high level of confusion about how BNPL works among non-users. A quarter (24%) of people who hadn’t ever used it thought BNPL attracted high interest, despite none of the new breed of BNPL companies charging interest and Klarna charging neither interest nor fees on BNPL products.
Alex Marsh, Head of Klarna UK, commented: “It’s clear that over a year of restrictions has caused a shift in consumer behaviour which looks set to stay, with online shopping continuing to rise. As a consequence consumers have also shifted their payment preferences to match their lifestyles. The research has shown that while many consumers own credit cards, they are increasingly getting stung by a lack of understanding of how they work, unexpected fees, and the danger of rolling over debt month to month. On the contrary, UK consumers using services like Klarna’s benefited from additional flexibility at no extra cost, saving £76m in credit card interest last year alone.”
Nymbus enters strategic partnership with Plaid
Nymbus, a leading provider of banking technology solutions, has partnered with Plaid, a data network powering the digital financial ecosystem, to more instantly authenticate and fund customer bank accounts for financial institutions.
This new integration will allow Nymbus bank and credit union clients to securely onboard new users in a matter of seconds, which in turn translates to more active and engaged banking experiences. Plaid’s data network enables consumers to connect their financial accounts at over 11,000 institutions globally to more than 5,000 digital finance apps, including leading payments, investing, and budgeting tools.
What are the benefits of the integration?
Benefits of the Nymbus and Plaid integration for financial institution customers include:
- Improve user identity verification and reduce fraud.
- Instantly authenticate and link members’ bank accounts.
- Streamline ACH transfers between any bank or credit union in the US.
- Access and analyse comprehensive transaction data.
- Validate real-time account balances to protect against overdraft and enable account pre-funding.
“As more consumers than ever before rely on digital finances for their everyday lives, financial institutions need to meet their customers where they are while supporting safe and reliable money management experiences,” said Sarah Howell, Chief Alliance Officer at Nymbus. “Our expanding network of partners are important contributors to Nymbus’ combined portfolio of the technology, people and process available to quickly innovate with new routes to market and revenue streams.”
Continuous growth and expanding partnerships
Founded in 2015, Nymbus has continued to grow. Most recently the company has closed a new round of financing led by the Curql Fund. The US$5 million investment will be used towards Nymbus CUSO and accelerate a shared commitment to breakthrough technology for ensuring continued growth and stability for the credit union community.
Nymbus CUSO was founded in March 2021 to help break through barriers to growth, and its mission is to connect credit unions with trusted fintech offerings that both simplify technology delivery and enable new digital revenue opportunities.
Last year Plaid set a goal to move 75% of its traffic to APIs by the close of 2021, calling it “one of our top priorities as the industry moves full-steam ahead toward a fully digital financial system.”
Recently it has announced an open finance partnership with Capital One, a digital finance innovator, and the successful completion of its migration to the Capital One API. They have also completed or have in-motion data access agreements with major US financial institutions, including U.S. Bank, JPMorgan Chase, Wells Fargo, and others.