According to Revolut, Pay Later will be the first BNPL product in Ireland that uses an approved credit limit and with a consideration for affordability. Further to this, customers will be in control of when they use Pay Later, rather than being restricted to certain merchant partnerships.

1.9 million adults have a Revolut account in Ireland, where the Pay Later service will be rolled out initially. The challenger bank will then look to offer the product in additional markets from the end of 2022, with Poland and Romania being the next to gain access.

Qualified customers can use Pay Later for purchases up to a maximum of €499 and spread the cost of a purchase across three monthly instalments, with the first instalment paid upfront by the customer at the time of purchase followed by two monthly instalments. A 1.65% fee per purchase is also repaid as part of the final two instalments.

After checking customer affordability by linking to customers’ existing bank accounts through open banking, Revolut assesses customer suitability for ‘Pay Later’ with an underwriting process and will be given their own bespoke limit. Unlike other BNPL providers, Revolut approves the credit limit before the transaction, rather than offering an instalments payment method at the point of sale.

Integrated within the app, once approved, Revolut users can activate Pay Later when they choose and view their Pay Later balance in the Cards section and the Pay Later hub. Customers are also able to repay instalments early if they wish without additional fees.

Joe Heneghan, CEO Revolut Europe, says: “Pay Later is an exciting and fast-growing area of personal finance and consumer spending, and we are excited to add Revolut ‘Pay Later’ to our financial superapp.

“Revolut Pay Later gives our customers more control and flexibility over their personal finances, in a responsible way, by enabling them to spread the cost of purchases over three instalments. This encourages people to pay within two months, rather than calling on overdrafts and credit cards which don't carry the same emphasis on quickly paying back the amount borrowed.”

This week it was also announced that buy now, pay later lenders in the UK will be forced to carry out affordability checks and refrain from misleading advertising and promotions under new rules proposed by the UK government. Under the long-awaited plans, lenders will be required to carry out affordability checks, ensuring loans are affordable for consumers, and will amend financial promotion rules to ensure BNPL advertisements are "fair, clear, and not misleading".

Lenders offering the product will need to be approved by the Financial Conduct Authority (FCA), and borrowers will also be able to take a complaint to the Financial Ombudsman Service (FOS). Economic secretary to the Treasury, John Glen says: “By holding buy now, pay later to the high standards we expect of other loans and forms of credit, we are protecting consumers and fostering the safe growth of this innovative market in the UK.”