BURNING MONEY: How much you could be saving per year by giving up smoking
Giving up a pack of cigarettes a day could save you up to £4,197 a year – the price of a family holiday abroad.
Cutting out that weekly pack of cigarettes could save you £598 a year, or £2,991 over five years.
Quitting for good could save you up to £41,975 over ten years – equivalent to a 20% deposit on a new home.
You could be saving up to £4,197 a year by giving up a pack of cigarettes a day according to new research, with savings of £598 a year for less frequent smokers.
Vaping experts over at IndeJuice calculated how much money you could be saving based on the average UK cost for a pack of 20 cigarettes over various timespans. They broke down how much you would save throughout your lifetime if you kicked the habit for good, as well as comparing what you could be spending the money on instead.
The research reveals that if you are smoking one pack of cigarettes per day at the average UK cost of £11.50 per pack, you would save £334.58 per month or £4,197 over the course of a year by quitting – the cost of a family holiday abroad for four people, the cost of running your car for ten years or paying for 11 years’ worth of gym memberships.
Someone who regularly smokes a full pack of cigarettes a day can expect to see staggering savings in the long run – banking up to £41,975 over ten years from quitting smoking. This is the equivalent of a 20% deposit on a £200,000 property, the price of a Porsche Cayman or nearly a kilogram of 24 carat gold.
For people who are only smoking a couple of cigarettes a day, the cost can still quickly add up. If you are smoking just one pack of cigarettes a week at the same average cost, you could still make savings of £598 a year, or £2,991 in your pocket over the next five years.
The money saved by quitting for one year, could cover the cost of a three-course meal for you and your significant other 11 times a year, the cost of nine weekly food shops or seven annual Netflix subscriptions.
A spokesperson from IndeJuice added: “Many smokers are already aware of the harm imposed on their body by regularly smoking, but it is easy to overlook the financial savings that could be made by choosing to quit for good.
“When looking at Google Trends data over the past five years, there has been a significant increase in people searching the term ‘quit smoking’ year on year, with the exception of 2021 where there was a 2.3% decrease in searches from the previous year.
“As we emerge out of the pandemic, it is important that we continue to reflect on the health benefits of quitting for good, and the long-term savings offer an additional incentive to do so.”
Paul Wilson, Personal Finance Expert for Little-Loans.com, shares five ways you can take back control of your finances this year
Even if you haven’t made any resolutions, the new year is still a good time to take a look at areas of your life you might want to improve upon.
Your finances can be a great place to start, because freeing up some money could give you the opportunity to do other things, like building up a savings pot or emergency fund, making home improvements or booking a holiday.
Here are five tips to tidy up your finances in 2022:
Budgeting
If you want to get a grip on your spending, the best place to start is with a budget. This could be a simple spreadsheet with your incomings and outgoings, or you could use a budgeting app to help. Apps like Snoop, Money Dashboard, Emma and Monzo can help you keep track of what you spend and show you where you may be wasting money. Most of them let you link all of your accounts and will categorise your spending so you can see where you could make cutbacks. There’s plenty of apps to choose from so research the market and find the best one for your circumstances.
Subscriptions & memberships
Perhaps one of the biggest money wasters is unused subscriptions or memberships. Write a complete list of every subscription you have and how much it costs. Then decide if it’s worth keeping. If you’re paying for a Netflix plan that lets you watch on four devices but you only ever use the TV in the lounge, then downgrade.
Similarly, if you’re signed up to several streaming sites, ditch at least one. With music streaming, check if you could save by having a family plan rather than individual accounts. Do you really need Amazon prime, or could you wait a couple of extra days to get free standard delivery anyway? Be thorough and honest. If you’ve only been to the gym a handful of times in three months then is it worth paying for?
Direct debits & bills
Do a complete audit of all your direct debits and standing orders. Are you getting the best deals or could you be paying less? Set reminders for when all of your utilities or insurance products are due for renewal and make sure you shop around as soon as the time comes.
Your TV package could be reduced if you decide to cancel some of the channels you barely watch, and some mobile phone providers will reduce bills when your contract reaches a certain length of time. Use an evening to analyse all of your direct debits, set renewal reminders and call any companies to ask if they can help you reduce your bills.
Consider consolidating
If you have several credit cards, loans or car finance deals, you might be able to consolidate them into one easier payment. Work out what you owe and see if it would be cheaper to get one loan to cover it all. When paying off credit cards make sure you are still taking advantage of any introductory offers. If you are paying interest then look to see if you can switch to a card with a 0% balance transfer rate. There is no one size fits all when it comes to paying off debt, but check what you owe and whether there is a way to reduce it right away.
Start saving
Saving doesn’t have to be complicated. Open a straightforward savings account and start putting a small amount of money away every month. Do it as soon as you get paid so it’s less noticeable.
It could be the cost of a takeaway each month, so if you save £30, by the end of the year you’ll have £360 to put towards Christmas or to carry over and keep adding to.
Start with an amount that you won’t miss to ease you into it. Even £10 could help you get into the habit and give you something to work towards.
Cash Out
Having actual money in your hand can make you more mindful of what you spend. Many people adopt an envelope or jar method, where they attribute money each month to things like ‘food’, ‘eating out’ etc.
Seeing the cash you have left can be an incentive to stay on budget. Being mindful of your money is one of the first steps to seizing control of it and getting on top of your spending in 2022.
Some banks can and should be doing more to protect their customers from criminals trying to steal sensitive information, Which? research has found.
With the last year seeing an increase in scams, many consumers will expect that the companies they deal with in their everyday lives are doing everything they can to protect them.
However, a new Which? investigation has found that some banks are failing to use all the tools available to them to combat scammers, leaving weaknesses in their security systems that scammers could exploit.
The consumer champion looked into what protections banks were putting in place to protect their customers from receiving fraudulent emails, SMS messages and phone calls.
These so-called phishing attacks are worryingly common. Scammers send legitimate-looking messages that are designed to tempt people into divulging sensitive information, such as bank account details, usernames or passwords.
Phishing scams may try to imitate (or ‘spoof’) banks’ genuine email addresses or domains, sometimes by making slight changes – for instance, by changing ‘.co.uk’ to ‘.com’.
Banks should be implementing a system that protects web addresses they own or use – known as ‘domain-based message authentication, reporting and conformance’ (DMARC) – to prevent spoofing attacks.
Banks can use DMARC to tell email providers how to handle the unauthorised use of their domains.
The process of introducing DMARC is frequently done gradually: by initially setting records to ‘none’ (a monitoring phase where no action is taken if DMARC checks fail) before working towards ‘quarantine’ (which moves emails to junk/spam if they fail the checks) and ultimately, a policy of ‘reject’ (which blocks all emails that fail the checks).
When Which? asked security experts at technology company 6point6 in April to check whether banks offered this protection, some banks were falling short.
At the time of the investigation, the Bank of Ireland and Agricultural Mortgage Corporation – a wholly owned subsidiary of Lloyds Banking Group – had not yet introduced DMARC.
This could have allowed scammers to forge their email address and send messages that would appear indistinguishable from genuine ones from their bank. Both have since taken action to resolve this.
The investigation also found that Nationwide, TSB and Virgin Money – nationwide.co.uk, tsb.co.uk and virginmoney.com, respectively – had not set their policies to ‘reject’ all emails that fail DMARC checks. TSB and Virgin Money told the consumer champion that they are working towards this.
Nationwide said it has security features to protect against spoofing and will ‘look at ways to improve email security, including future enhancements to DMARC security.’
The investigation also uncovered that The Co-operative Bank, First Direct, Starling and Tesco Bank had no DMARC system in place for their alternative domains, but did for their primary domains.
Although The Co-operative Bank has protected its ‘co-operativebank.co.uk’ email address, there are no DMARC records for ‘co-operative.co.uk’ and ‘coop.co.uk’ – two domains that are owned by The Co-operative Group, a separate company not associated with the bank – making them vulnerable to scammers who could pose as The Co-operative Bank using alternative email addresses.
Since the investigation, Starling and Tesco Bank have now applied DMARC to alternative domains, starlingbank.co.uk and tescobank.co.uk, respectively.
First Direct and The Co-operative Bank told Which? they are reviewing the inclusion of their alternative domains – firstdirect.co.uk and co-operativebank.com – within their existing DMARC policies.
While banks are further ahead than other industries when it comes to implementing DMARC, Which? believes that it is often too hard for customers to tell the difference between a phishing email and genuine communication from banks due to inconsistent practices across the industry.
This is particularly concerning amid a worrying culture of banks blaming victims for falling for scammers’ tricks, despite their heightened sophistication. This means people often face a lottery to get their money reimbursed under the industry’s voluntary bank transfer scams code.
Which? is calling for all banks to implement DMARC and configure it correctly, setting their policies to ‘reject’, meaning email providers should block any emails that fail these checks.
Banks should also be clamping down on number spoofing, which involves scammers manipulating caller IDs to mimic the phone numbers of legitimate organisations. To tackle this, Ofcom worked with the banking industry body UK Finance to identify a list of ‘do not originate’ (DNO) numbers – numbers that are never used for outbound calls.
Most banks had signed up to the scheme at the time of the investigation, apart from The Co-operative Bank and Nationwide – although both have since told Which? they plan to join.
Banks can also protect their SMS headers – the name or number a text message appears to come from – against spoofing by registering with the SMS SenderID Protection Registry run by the Mobile Ecosystem Forum.
The consumer champion believes that if banks did not include weblinks or phone numbers in their official SMS communications – sensitive information that is prone to spoofing – consumers could feel more secure and be able to spot scams more easily.
Which? is working on a best practice guide for businesses to help raise standards of SMS communications and bring greater consistency to how they protect consumers.
Jenny Ross, Which? Money Editor, said: “It has never been harder for people to know whether they’re receiving genuine communications from their bank, or being tricked – so it is crucial that banks take every measure to protect their customers from these devastating scams.
“These include implementing email scam protections properly and no longer putting phone numbers and links in messages, to ensure customers feel safe and can bank with confidence.”
Parents and grandparents are choosing to pass on wealth early to help children get on the ladder
Over a third (35%) of High Net Worth Individuals (HNWI) and business owners in Scotland have met a financial planner for guidance on passing on wealth
A third of individuals have spoken with their loved ones about how they will distribute their assets
But only 2 in 10 (19%) have created a will
The ‘Bank of Mum and Dad’ continues to fuel the Scottish property market as parents and grandparents choose to pass on wealth early to help the younger generation get on the ladder according to research by Rathbone Investment Management.
Home ownership continues to remain out of reach for many young people, with house price growth increasing by 6.9% across Scotland in the last twelve months.[2] The COVID-19 pandemic has also caused financial difficulty for many and has exacerbated the challenges facing young people wishing to get onto the ladder. The ‘Bank of Mum and Dad’ has therefore stepped in to support.
Rather than passing down via inheritance with the risk of a large tax liability, 28% of those surveyed have or are considering passing on their wealth early in order to help children and grandchildren with property purchases or other significant expenses. 29% of individuals have put money into a trust for their children or grandchildren, and a quarter (26%) have contributed to their university expenses.
The decision to pass wealth down early is partly down to a larger trend over the last year that saw many look to get their financial affairs in order. Indeed, with national lockdowns and continuing social restrictions in place, many people have had more time to plan ahead and explore ways in which they can put a financial plan in place.
Over a third (35%) of Scottish High Net Worth Individuals (HNWI) and business owners surveyed have met a financial planner for guidance on passing on their assets.
More widely, a third of individuals (33%) have spoken with their loved ones about their financial plans for the future. However, only a fraction of people have made these plans official. Indeed, just two in ten surveyed (19%) have made a will.
Kindar Brown, senior financial plannerat Rathbone Investment Management: “COVID-19 has caused many individuals to think about how they might best support their loved ones financially. The difficulty of getting onto the property ladder has called for the ‘Bank of Mum and Dad’ to step up and provide a helping hand.
“With all the events of the last twelve months, putting a financial plan in place has moved further to the front of many peoples’ minds, highlighted by the uptick in enquiries to speak with a financial planner.
“Taking the time to review your financial affairs now and make sure everything is in order can provide peace of mind that your loved ones will be protected, and your wishes met, should the worst happen.
“As part of your plan, you could for example consider whether passing on wealth during your lifetime rather than within your will would make sense for your circumstances.
“If you won’t have need of the money in the future, then helping your children or grandchildren with those important – and often costly – life stages could be an effective and tax-efficient route to take, depending on your situation.”
Things to consider when creating a financial plan
Establish a financial plan
A good financial plan starts with aspirational goals – it is about focusing on what is important to you and what you want to achieve. It can help you determine whether you are on track to meet your goals and help you envisage your financial future.
You might want to plan for retirement and understand how much you will need to afford you the lifestyle you wish or perhaps you are concerned about the costs of long term care or making sure your family are provided for in the event of your death? Once you understand how much you require to meet your own lifestyle goals, you can identify how much you can afford to gift to your family during your lifetime without leaving yourself financially vulnerable.
A financial planner can guide you through the various aspects and help you put a plan of action in place.
Make a will and regularly review it
Although creating a will may seem a little daunting, it’s a good place to start when looking to get your financial affairs in order. A correctly drafted will can ensure that your wealth is distributed to your loved ones as you wish and can prevent delays in doing so.
It’s important to regularly review your will in order to ensure it reflects your current wishes. This is particularly important after life events like marriage, divorce and the birth of children or grandchildren.
Consider whether you want to gift and how much
Once you’ve established your financial plan and your will has been drafted, you will have a better understanding as to whether making gifts to your family is affordable. Gifting during your lifetime can be an efficient way to pass on wealth and help reduce the inheritance tax payable on your estate when you die.
There are a number of gifts you can make without paying tax including an exempt amount of £3,000 per annum and unlimited small gifts of up to £250 per person.
You can also of course gift larger amounts, however if you die within seven years of making the gift it may be liable to inheritance tax depending on the value of your estate
Nine communities across the UK are taking part in a trial to help address the challenge of improving access to cash. Two – Cambuslang and Denny – are in central Scotland.
The Community Access to Cash Pilot (CACP) initiative chose the communities based on the location, the issues the communities faced, and the local people willing to lead the pilots.
Each community will trial a number of different solutions, based on meeting the needs of local communities. These include:
Three new local ‘banking hubs’ in dedicated retail spaces on the high street, which combine the cash-transaction facilities of a Post Office with access to community banking services offered by the key retail banks, allowing the privacy and security people expect in a bank branch
Speedy and automated local cash deposit facilities for small businesses, so that retailers don’t have to close to travel to a nearby town bank branch to deposit their takings
Existing Post Office branches restructured and refurbished with cash services streamlined to make it easier for local residents and businesses to withdraw and deposit cash quickly and safely.
Pop-up Post Office services, allowing small communities to access basic banking services over a Post Office counter within an existing small shop
Widespread ‘cashback’ from local stores, restaurants and pubs – as well as from PayPoint counters, and new app-based digital services – to widen the options for people to get cash locally, and to help business reduce their own costs of depositing cash
New, free to use ATMs
Digital education services to help those who want to access digital banking services
The original plan was for each pilot community to start implementing their solutions over the remainder of 2020, with the aim that they are all fully operational by the end of 2020. The pilots were to operate for the first six months of the 2021, reporting back their findings in the summer of 2021. However the timetable has been revised due to the Covid pandemic.
The pilots operate in a wider context of a UK-wide cash infrastructure under threat, millions dependent on cash, and a government commitment to legislate to protect cash access. The aim of these pilots is to trial solutions which could have wider applicability across the UK.
CACP is chaired by Natalie Ceeney CBE, the author of the Access to Cash Review and brings together the resources and expertise of the financial services industry (including all of the major retail banks) with those of the Access to Review panel.
The team is also working closely with a wide range of local and national consumer groups and charities to bring in depth expertise to help support the work.
Speaking when the initaitve was launched last year,Natalie Ceeney, Chair, Community Access to Cash Pilot, said: “Cash remains critically important to both individuals and communities across the UK. The rapid switch to digital is threatening the viability of today’s cash infrastructure.
“This can lead to consumers left without cash access or forced to leave their own village or town to get cash elsewhere, often at significant inconvenience and cost. In turn, local retailers lose custom, as consumers spend their cash elsewhere, and then struggle to bank their cash takings without shutting up shop to drive to a bank branch some miles away, losing revenue and frustrating customers. It’s critical that we find ways to protect the viability of cash, for consumers and communities alike.
“These pilots are designed to find sustainable ways to keep cash viable locally, which, if successful, can then be rolled out more widely. The government has already committed to legislate to protect cash, and the financial services regulators are working closely with banks to identify practical next steps. Our aim is to use the pilots to critically inform this work.
“The work we’ve done with local communities has shown us in some detail what is needed. It’s clear that to keep communities viable, people need to be able to get cash easily, in a variety of ways. ATMs are important, but don’t meet everyone’s needs, particularly the most vulnerable, so being able to get cash over a counter, in a safe space, is still important to many. Small businesses equally need to be able to deposit cash, and locally, so that they don’t need to close their shop to bank their cash.
“These pilots will use innovative technology to help people access and deposit cash. The pilots will also work with key existing service providers to explore how they can support the cash infrastructure, by creating local drop in spaces for community banking, retailers offering cashback widely and Post Offices enhancing their services to create a new model of ‘Post Office Banking Hubs’.
“The commitment of the major banks, the Post Office, LINK and key consumer groups to all work together on this initiative gives us confidence that we can create solutions which keep cash viable in a sustainable way.”
Nick Read, Chief Executive, Post Office: “Our branches provide critical cash deposit and withdrawals services for millions of personal and business customers every week. We will use these pilots to trial new designs in selected branches; and introduce automated cash deposit facilities for business and personal customers who may have previously used this service at a bank branch.
“Everyone should have the right to use cash and be able to easily and securely access it wherever is most convenient to them. We are pleased to be playing a key role in these pilots and our Postmasters who are taking part will be in a position to share important insights that will make a real difference as to how we continue to best meet peoples’ cash needs in future.”
Alison Rose, CEO, NatWest: “We know that cash is an important part of the way that many communities across the UK bank with us, which is why we have worked with the industry to help create this pilot programme.
“The lessons we learn from working with communities to develop innovative solutions are really important as we continue to invest in sustaining access to cash and financial capability.”
John Glen MP, Economic Secretary to the Treasury and City Minister: “Cash remains important to the daily lives of millions of people across the UK, and protecting access to it is a key Government priority.
“I welcome the Community Access to Cash Pilot Initiative, which will test innovative new approaches to support access to cash in local communities that can be extended across the UK. Thank you to Natalie Ceeney and all industry participants for their important work to ensure we support consumers and businesses who continue to need to use cash.”
Two of the nine locations are in Scotland:
Cambuslang:
Cambuslang is a town of c.28,600 people, the third largest town in South Lanarkshire, but since 2018 has been unbanked following the closures of branches by three banks in quick succession.
According to the latest version of the Scottish Index of Multiple Deprivation (SIMD), some 40% of areas (data zones) in Cambuslang East and 25% in Cambuslang West are in the bottom 20% of the SIMD.
The Cambuslang community are keen to address two key issues, first, supporting financially vulnerable customers in accessing cash, and second, supporting small businesses to be able to access and bank cash.
The local leaders of this pilot, Cambuslang Community Council, are passionate about the opportunity to support their community though better access to cash, education and, ultimately, influencing the coming legislation change.
The Cambuslang community will be piloting:
A Post Office Banking Hub in an empty retail outlet, with the Post Office offering transactional services in a private environment, with community banking support from the major banks, debt advice, and support for financial issues
A ‘Drop and Go’ cash deposit facility for small businesses in the Banking Hub to make it easier for local businesses to bank cash, whichever bank they are with
Cashback with purchase offered by a large number of local stores
Cashback without purchase offered by PayPoint convenience stores
Widespread advertisement of what the banks can offer vulnerable customers
Digital education services to help those who want to access digital banking services, designed for the Cambuslang community
A Vulnerable Customer Directory – ensuring that everyone is aware of the services that the retail banks can offer to vulnerable customers
Denny (Falkirk):
Denny is a small town located between Edinburgh and Glasgow, with a population of circa 8,000, and with 16% of the population over 65 years old. They are a semi-urban location that has seen a reduction in their access to cash facilities.
They are looking to improve the cash deposit and withdrawal facilities for both small local retailers and consumers, and also want to support their community to be able to budget and access cash digitally.
The Denny community will be piloting:
Cashback with purchase offered by a large number of local stores
A refreshed Post Office with improved cash facilities which can better meet community needs
Cashback without purchase offered by PayPoint convenience stores
Digital education services to help those who want to access digital banking services
A Vulnerable Customer Directory – offering support to those who need it
A digital solution to coin recycling supported by Shrap – an innovative new service which allows consumers to store change on a card or app, saving retailers from managing small change
A Vulnerable Customer Directory – ensuring that everyone is aware of the services that the retail banks can offer to vulnerable customers
Gareth Shaw, Which? Head of Money, said: “These initiatives could have a really positive impact on communities that have seen sharp cuts to their cash machine and bank branch networks in recent years, which have forced some cash dependent consumers to travel unreasonable distances or face hefty charges to withdraw their own money.
“However, in order for cash to remain a viable option for people across the UK, the government must take action. It needs to urgently set out when it will introduce the legislation it promised last year to protect access to cash, and put a wider strategy in place that ensures people who depend on cash are not cut off from the money they need to pay for essentials.”
New research by credit reference agency Equifax reveals that the financial uncertainty of 2020 means 85% of people in Scotland will change the way they manage their personal finances in the immediate and long-term future.
Although one third (34%) of Scots said 2020 brought greater financial uncertainty, 16% have entered this year feeling positive about their finances. 54% of those who experienced financial uncertainty in Scotland said they are now trying to be more frugal, compared to 46% of the wider UK.
Key data:
46% of residents in Scotland are trying to spend less disposable income each month
31% of Scots feel confident about their finances going into 2021 compared to just 19% of the UK as a whole
70% of 18-34-year-olds across the UK said 2020 brought them financial uncertainty, steadily decreasing across all age groups with only 11% of those aged 65 plus feeling the same
As a result, 63% of 18-34-year-olds plan to change the way they manage their money in the immediate future, with 32% starting to save or put money aside
52% of UK women compared to 38% of men who experienced financial uncertainty in 2020 said they will be more frugal in 2021
41% of UK women plan to ‘buy more things I need and less things I want’, compared to 33% of men
Lisa Hardstaff, Head of Customer Experience at Equifax commented: “Our latest research suggests vital personal finance lessons have been learned in this pandemic, and more people are looking to better manage their money.
“54% of those surveyed in Scotland said they are trying to be more frugal and it’s encouraging to see that 13% are proactively researching ways to manage their money. 19% of the region are also starting to put money aside and will be using spreadsheets and apps to help them budget.”
Despite the huge financial uncertainty of last year, the research revealed that 28% of residents in Scotland used credit less than they did in 2019. However, 14% used short-term ‘Buy Now, Pay Later’ services for their online Christmas shopping.
Clare Seal, author of Real Life Money and frugality champion added: “One of the silver linings of last year is that as a nation we are now being more open about financial concerns and mental health issues. In fact, 8% of the region said they are proactively seeking more financial advice from family and friends.”
As the Christmas credit card bills land on people’s door mats, Equifax has a wide range of useful articles and tips in its Knowledge Centre. It also has an online budget planner that allows people to monitor their income against their outgoings, to help them take control of their finances now and in the future.
“A financial planner not only helps manage outgoings each month, it allows people to prioritise important financial commitments like mortgage payments, council tax, etc” concluded Lisa Hardstaff.
“It can also help to see where money can be saved, such as unused memberships or cutting back on food bills. If we are in the Year of Frugality have a clear view of all outgoings is essential.”
Which? is calling for Buy Now, Pay Later firms like Klarna and Clearpay to be fully regulated to provide greater protection for consumers, as new research from the consumer champion finds concerning industry practices encourage people to spend more than they planned to.
The consumer champion’s findings show that these slickly designed, easy-to-access credit products are encouraging impulse buying, with nearly a quarter of BNPL users (24%) saying they spent more than they planned to because BNPL was available.
With one in ten (11%) BNPL users reporting that they have incurred late charges when paying this way, Which? is concerned about the dangers involved with this growing form of unsecured credit, particularly when the risks are not always made clear, and is calling for the financial regulator to be given new powers to fully regulate the BNPL industry to prevent consumers from being harmed.
The research suggests pushy marketing strategies, combined with sales features that make payment easier – such as ‘express checkout’ services on some retailers’ websites – could be driving people to overspend and leading to people falling into debt, a concern also shared by debt charities such as StepChange.
Which? also found that a quarter of BNPL users (26%) said they had not planned to use this type of payment option until it popped up at checkout, while two in ten (18%) said they used BNPL because they were offered a discount to do so.
One in ten (13%) also said they used it by accident because it was selected as the default payment option at checkout. One survey respondent said: “I was tricked into [using] it because the box was already ticked”.
BNPL firms also advertise heavily on their partners’ websites. Which? looked at 80 of these sites and found the largest BNPL ads take up as much as 80 per cent of the screen, with fashion retailers most likely to carry these prominent ads.
These factors are evidence of the firms’ application of consumer psychology to drive sales, a strategy one BNPL provider has promoted to its retail partners.
In 2017, Klarna, one of the leading BNPL firms in the UK, commissioned a study with the University of Reading into online shopping behaviour. The report, intended for partner retailers, explains how to design ‘customer journeys’ that will persuade people to make ‘emotional’ purchases instead of ‘logical’ ones.
However, as Which? research shows, these frictionless customer journeys can lead to shoppers spending more than they can afford, without necessarily being aware of the risks.
41 per cent of people in the Which? survey who were aware of BNPL either did not believe or did not know that missing a payment could lead to the BNPL firm passing your debt on to a debt collection agency.
As a result of its findings, Which? is now calling for providers of this type of BNPL service to be regulated by the Financial Conduct Authority.
In its submission to the regulator, the consumer champion said that, while supportive of innovation, it believes that the BNPL market must have consumer protections in place in line with other regulated unsecured credit products.
Giving the FCA the powers to regulate the BNPL market would allow it to more effectively monitor how BNPL firms treat consumers, and if necessary, take action to prevent consumers from being harmed.
Jenny Ross, Which? Money Editor, said: “While Buy Now, Pay Later services offer speed and convenience at the checkout, our research shows their design makes it far too simple for shoppers to spend more than they were intending.
“This could lead to people building up debts that they may struggle to pay back, which is particularly concerning if they don’t understand the risks of using this type of product.
“Given that many people’s finances are stretched now more than ever, we believe that the FCA needs to regulate this market to ensure consumers are not harmed and that action can be taken if these firms are treating customers unfairly.”
A spokesperson for Klarna responded: “While we cannot speak for the sector as a whole, it is wholly incorrect to claim that Klarna uses ‘pushy marketing strategies’. All Klarna customers are provided with our terms and conditions, which clearly outline the potential consequences of non-payment.
“If a customer misses a payment, we will proactively contact them to remind them via text, email, in-app notifications and letters. Klarna will only refer unpaid debts to a debt collection agency as a last resort after a period of several months.
“Klarna is fully engaged with the FCA review of the unsecured credit market.”
