Financial markets regulator very concerned about plans for "pay later" option in stores

The Netherlands Authority for the Financial Markets (AFM) is very concerned by payment services Klarna and Adyen’s plans to offer “buy now, pay later” options in physical stores. On Tuesday, the Tweede Kamer, the lower house of the Dutch government, unanimously adopted a motion to ban this option from physical stores, Nieuwsuur reported.

The “pay later” option is already common with online purchases. Some physical stores, like H&M, also offer it in-store, but customers have to log in with their apps and choose the option as if it were an online purchase. Klarna and Adyen are working on introducing it at the paypoint.

In practice, choosing the pay-later option means borrowing money from the payment service. The amount must be paid within three months. But because services like Klarna, Rivet, and Billink charge little or no interest, they don’t have to meet the strict requirements for credit providers, such as checking whether the consumer earns enough to repay the loan. People who miss payments are quickly confronted with massive reminder costs. Some pay later services earn 40 percent of their income with these costs.

“There is no test at all to see whether the loan is a good idea for you,” Teun van der Velden of the AFM told the current affairs program. “If you use the pay later facility, it could be that you did that last week and that you no longer have an overview [of your spending]. We are concerned about this accumulation of debt and also the habit of incurring a debt every time.”

According to Van Velden, many consumers use pay-later online because they want to first try on the shoes they’re buying, for example. “That argument no longer applies offline,” Van der Velden said. “In that case, there is much more often a financial necessity: I don’t actually have the money, so I press the ‘pay later’ option. Then the problems soon arise.”

The AFM has conducted several studies into the size of the pay later industry. In 2022, people in the Netherlands made 45 million pay-later transactions with a total value of 4.8 billion euros. About 3 percent were transferred to a debt collection agency. Last year, children between the ages of 13 and 17 made around 600,000 pay-later transactions.

Due to new European regulations, pay-later services will be subject to stricter rules and AFM supervision from November 2026. Parliament wants the government to intervene more quickly. On Tuesday, the Tweede Kamer unanimously adopted a motion to ban pay-later options in physical stores. The responsible State Secretary will respond next month.