“Buy now, pay later” | Spread your payments, but at what cost?

The “Buy now, pay later” formula is more accessible than ever in Quebec. More and more retailers are offering their customers the option to split their bill into several installments with online services such as Afterpay, Sezzle or Klarna. Some businesses are going further by making the feature available in-store. And a new competitor to the ticketing giants, TIXR, is integrating its spread payment system into its ticketing system.

A $40 tank top, a $95 concert ticket, a $300 grocery store: now you can pay for almost everything with a payment plan.

” [Les consommateurs] “will look at the amount of payments and not the total cost,” laments Alyssia Marchetta, budget advisor at Option consommateurs, who too often notices a lack of knowledge on this subject when she meets clients.

Already in 2021, one in five Canadians said they had spent more than planned because of the spread payment plan, according to a pilot study by the Financial Consumer Agency of Canada.

A ticket sales platform that arrived in Canada about a year ago even integrates the option directly into its website. In other words, to buy tickets on TIXR, there is no need to create an account with a third party to benefit from installment payments, which makes it easier to access.

An integrated option

“Currently, approximately 24% of sales are made through the payment plan option, particularly for events where the cost of the ticket is higher,” explains Stéphane McGarry, Vice President of Partnerships – Canada at TIXR.

Described as the “Netflix” of entertainment by Mr. McGarry, the California-based platform TIXR sells tickets for popular companies in the event world in Quebec, such as Beachclub, New City Gas and the Riverside Festival in Gatineau.

Unlike a platform like Ticketmaster, which works with Klarna, TIXR itself offers the option to pay in installments at its virtual checkout. No need to create an account with a third-party company: just click on the option, for a credit fee of about $9.

“About 50% [des évènements] are using it and we see that interest is growing,” explains the head of TIXR.

This is the case of the Unity Electro Fest, an electronic music festival that takes place in Quebec City at the end of August. So far, about 3% of the tickets sold have been purchased with the option of paying in installments.

The Pointe-Calumet Beachclub, for its part, offered the option only for the first event of its summer, with the ticket price being slightly higher than the following ones. “We’re talking about probably barely 10% of the tickets that were sold with the option,” reports Olivier Primeau, owner of the venue.

Although the trend does not yet seem to be reflected in Quebec, according to the two organizations, spread payment plans in Canada have experienced annual growth of 51.6% in 2023, according to Research and Markets.

” In Quebec […]we don’t have any figures yet, but it doesn’t surprise me that there is an increase in the country,” notes Alyssia Marchetta.

A trend that is not about to run out of steam. In February, the American firm Research and Markets predicted that the value of goods purchased using installment payments in Canada will increase from US$5.8 billion in 2023 to US$10.6 billion in 2029.

TIXR notes that the option is particularly popular with students and young adults aged 18 to 25.

Klarna in store

In 2022, Klarna, a “virtual shopping mall” that lets you split your bill for several well-known brands into four equal installments, arrived in the country. A year and a half later, the new fintech already had 640,000 users and had processed more than 2 million orders in Canada.

Lululemon, Canada Goose, Dynamite and Frank & Oak are just a few examples of retailers where you can use Klarna at the virtual checkout. Last October, Walmart joined them, making it possible to spread out the payment of your online groceries over a few weeks.

And Klarna isn’t just available online. For about six months now, some of the platform’s partner retailers have even been offering the option… directly in-store.

So far, only two stores in Quebec have tested the customer craze: Mountain Equipment Co-op (MEC), which specializes in outdoor equipment, and Moose Knuckles, known for its winter clothing. In a few weeks, furniture retailer Bouclair will be added to the list, we learned. The Press. According to Tony Trew, vice-president of marketing at Bouclair, the feature has been very successful in Ontario since its implementation in stores, which encouraged the company to expand it to another province.

For now, only about 1 in 100, or even 150, transactions involve Klarna at MEC, says Jules Fauteux, head of the Montreal branch. At Moose Knuckles in Mirabel, only a few connoisseurs use the option.

According to Jules Fauteux, customers are often discouraged from using it because they must first create a Klarna account before being able to benefit from it. This is amplified by the pressure of the queue at the checkout.

On the other hand, a customer might rush to install the app because they feel rushed by people waiting, according to Alyssia Marchetta, without really analyzing how the service works and costs. “When you [magasines] online, maybe you’d better take the time to check the conditions, find out a bit, try to understand,” notes the budget advisor.

The danger with installment payments? “It’s not clear to the consumer what kind of impact it can have on the credit file if you don’t pay,” the advisor sums up.

His main concern is the lack of data on the link between people who spend more and those who don’t pay their credit cards.

Last October, Option consommateurs released a research report on “Buy Now, Pay Later” products. The major conclusion: there is a significant lack of knowledge and a great need for literacy among Quebec consumers about the concept.

Consult the Option consommateurs report