Monzo has announced it is edging into the buy now pay later (BNPL) scene by offering its customers up to £3,000 worth of credit.
The fintech company is one of the first UK banks to launch into the fast-growing sector, following in the footsteps of tech companies such as Klarna and Clearpay.
Monzo said it has taken the “best bits” of BNPL schemes, credit cards, loans and overdrafts to create the “Monzo Flex” product.
Monzo Flex will be available to its five million customers on Thursday.
The number of consumers using BNPL schemes boomed in 2020, with the sector seeing £2.7 billion in transactions, according to the Financial Conduct Authority (FCA).
It is estimated that anywhere between five and 10 million consumers used a BNPL method while checking out last year.
Monzo Flex will allow users to purchase goods and services over £30 and, in a similar fashion to Klarna, will allow payments to be staggered over three instalments.
Customers can also choose to pay in six or 12 instalments, however these options will require them to pay interest of 19 per cent.
The fintech bank said that it would offer its customers pre-approved credit at the checkout after it conducts a “comprehensive affordability assessment”.
It will also allow its users to pay for a product up to 14 days after they buy it.
While there are growing concerns surrounding the BNPL sector and its lenders, Monzo is a regulated bank and therefore reports to credit reference agencies.
This means that other lenders, such as mortgage providers will be able to see a customer is using Monzo Flex.
Earlier this year, the UK government announced the BNPL space would be regulated by the FCA to product customers who opt in to using it after a review found there was cause for “potential harm”.