M&S launches buy now, pay later product

High-street retailer Marks & Spencer has launched its own version of buy now, pay later (BNPL), Sparks Pay.

It is a regulated scheme set up in partnership with M&S Bank. Available only to M&S Sparks loyalty card customers, offering shoppers credit of up to £500, allowing them to spread the cost of purchases.

Sparks Pay joins NatWest and Virgin Money in an increasingly-crowded BNPL market.

The scheme is currently only available when buying items on the M&S website or app - however, the retailer plans to roll it out to M&S stores nationwide next year.

The announcement of M&S’s new scheme comes as BNPL giant Klarna partners with food delivery platform Deliveroo - a move criticised by experts as diners could get themselves into debt just by ordering a takeaway. 

But there are risks in using BNPL, such as a lack of regulation and spiralling interest and fees if payments are not made on time. 

We take a look at how the M&S scheme works, and the pitfalls to beware of.

How does Sparks Pay work?

To use Sparks Pay, you need to be signed up to the retailer’s loyalty scheme Sparks. 

This is free to join (Sparks also gives members perks like discounts off certain purchases, and free treats when shopping in-store).

Once signed up, you’ll be able to select Sparks Pay when paying for items on the M&S website or app.

Customers get up to 76 days’ interest-free on their first order when they pay their balance in full, and up to 45 days for later transactions.

M&S says: “Once set up, customers can complete purchases with ‘one click’ payments and can easily manage their account in the M&S app or on M&S.com where they will be able to see recent transactions and statements, enabling them to track their spending and available balance.”

• What happens if I don’t pay off my balance in time? Customers who don’t pay off their items within 45 days (or 76 days if it’s a first order) will be charged interest at a rate of 23.9%.
• There is also a late fee of £12 if you fail to make the minimum repayment. Missed payments will be reported to credit reference agencies. This means a mark will be left on your credit file, which could impact your credit score.
• Is Sparks Pay regulated? While the BNPL sector still isn’t regulated, Sparks Pay is regulated. This is because M&S Bank is regulated by the Financial Conduct Authority, and therefore purchases of more than £100 are protected by the Consumer Credit Act. 
• Can I use other BNPL providers when shopping at M&S? Yes, M&S still offers other BNPL schemes at its online checkout, such as Clearpay and PayPal’s Pay in 3.

Why has M&S launched Sparks Pay?

The retailer says its new BNPL scheme is aimed at growing numbers of M&S customers who are shopping online and using digital payment methods. M&S.com now makes up a third ( of all clothing and home sales at the retailer, while there are just under 16 million Sparks customers.

Paul Spencer, CEO at M&S Bank, said: “We’re excited to be offering a new and simple way to pay for Sparks customers that is fully integrated with M&S and offers a seamless online shopping and payment experience, further expanding ways to pay at M&S. As a responsible lender, full credit and affordability checks are in place, enabling us to offer an instant credit account which can be used on multiple purchases, up to a maximum of £500, for those who love to shop online at M&S.”

What are the risks of BNPL?

BNPL has seen huge growth in recent years, with shoppers impressed by its convenience, as well as the ability to defer payments.

But, most providers are not regulated, and customers can be tempted to borrow more than they can afford, which could lead them to rack up significant debt.

Here are some things to consider before using BNPL:

• 0% purchase credit cards can help you spread costs over several months and may be a better alternative than using BNPL
• If you do use BNPL, only use it to buy what you can actually afford 
• Set a reminder for repayments so you don’t miss a payment
• Read the small print. Don’t just click on a BNPL button without first checking what fees and interest you could be liable for