As consumers become increasingly financially squeezed, deferred payment solutions are gaining ground, even for small purchases like clothing or groceries.
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At Ardene or Aldo, you can buy a blouse or a pair of shoes and pay for it in four payments, every two weeks. Without interest. With Afterpay, an Australian fintech company.
At Altitude Sports or Empire, you can do the same thing with Sezzle, an American company. Even at Walmart, Klarna lets you spread out your toaster payments over four weeks.
“Last year, there was a wrestling show in Montreal, but it was $500, so I didn’t want to put it on a credit card and pay for it for months or years. So Klarna gave me the option to cut this into four slices. Four times $125. I don’t pay interest because it comes out of my checking account,” says Bruno Lemieux, from Outaouais.
David Descôteaux
He also uses the service when he buys tickets to see the Canadian with friends, he says. “If I buy several tickets, by the time they pay me, I put them on that. I use that as a method to just spread out the payment,” he says.
This is the new BNPL trend (Buy now pay later, or buy now and pay later). These “fintech” companies allow people to pay for their property in four interest-free installments, without using their credit card.
“I made large orders, I bought dresses and pants, sweaters and it varies between $12 and $25 per piece for a total of 2 or 300 piastres. It’s better than putting it on my credit card. It hurts my heart less to pay 25 dollars every 2 weeks than to pay 250 piastres. You feel less bad,” says Sophie, a young mother from Saint-Lambert.
Walmart is on board
Last October, Walmart adopted Klarna to allow its customers to pay later and interest-free when shopping online.
“We recently introduced Klarna to give our customers more payment options and flexibility when shopping on Walmart.ca and the Walmart app. This service separates purchases into four interest-free payments over a six-week period,” says Steeve Azoulay, Director of Public Affairs at Walmart Canada.
“For the moment, this service is offered online only. We are always listening to our customers’ feedback on new flexible payment options,” he adds.
Debt risk
According to a September 2023 Research and Markets report, BNPL payments in Canada are expected to grow by 51.6% annually to reach US$2.1 billion in 2023, and $8.3 billion in 2028.
However, some fear that this type of service contributes to debt, particularly among young people. “These products are presented as alternatives to credit cards when in reality, there are fees associated when you miss a payment, for example $7.50 with Sezzle, or when you has no money in our account,” points out Clarisse N’kaa, from Option consommateurs, who recently produced a study on the subject.
“It’s offered as an alternative to credit, but with a credit card, if you repay on time, you don’t pay interest either. So basically, how is this an alternative? she emphasizes.
Companies that offer split payments on e-commerce sites:
Afterpay, Sezzle, Affirm, ZIP, PayPal, and Klarna
How it works?
The amounts are debited directly from your bank account or credit card, usually every two weeks over a period of six weeks.
Interest to pay: $0