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UK supermarket rolls out BNPL loans to tackle rising food costs

UK supermarket rolls out BNPL loans to tackle rising food costs

With many of its customers struggling in the face of a cost of living crisis, UK supermarket chain Iceland is rolling out an interest-free BNPL product for use at its shops.

The Iceland Food Club allows members to apply for microloans of £25-100 on a pre-loaded card, which can be used in any of the firm's stores.

The loans are repaid at the rate of £10 a week, on a day of the member’s choice, and are available in six annual windows coinciding with school holidays, when family finances are usually most acutely stretched.

Critics have accused Iceland of encouraging customers to spend more than they can afford. Labour MP Stella Creasy, who has long campaigned on payday lenders, tweeted that the initiative is "deeply disingenuous".

However, Iceland boss Richard Walker has defended the Food Club, claiming that critics are "middle class people who have no difficulty accessing mainstream banks themselves, and would not think twice about paying for their own weekly shop with a credit card".

Walker says the Food Club has been developed in partnership with FCA-regulated Fair For You, a charity-owned ethical lender.

The initiative is also not a spur-of-the-moment "brainwave" and has been trialled through 18 months of regional pilots which found that 95% of participants found it helpful; 92% were able to end or reduce their use of food banks; and more than 80% were able to stop borrowing from high-cost loan sharks.

Says Walker: "All the evidence we have seen from our own trials - and from researching the widespread use of microcredit around the world - is that it is a really helpful way of managing low and irregular incomes, and improving the quality of life and the self-respect of those taking part."

Comments: (2)

A Finextra member
A Finextra member 25 August, 2022, 09:21Be the first to give this comment the thumbs up 0 likes

I am NOT a fan of BNPL and have posted and shared information on the likes of Klarna (triples all round). However - i think this IS a good initiative,  it is Specific (to Iceland) Measurable (as trialled in partnership with an ethical lender, Achievable/Attainable, Realistic (in its limited offer) and Time Bounded for repayments.   Iceland are NOT Klarna... They have a loyal client base who they want to retain,  the client base is not overly subject to mental health issues or in minority groups as are more open BNPL Clients - per UK Citizens Advice Bureau....  this is a modern interpretation of the old catalogue sales and payments methodolgy which served the UK consumer well for many generations.   Its a shame that Politicians knee jerk rather than think through competing business models when it comes to serving the most challenged in our society.... Well done Richard Walker and the Iceland social responsibility team..... Stella Creasey - Well done on Payday Loan legislation - good work there.... but you need to do some more work when it comes to responsible retailing....... Call out Klarna and its ilk..... Do NOT call out cost-effective UK retailers, who serve middle to lower income bracket clients, who also happen to employ thousands of Employees, who pay  Employers NI and UK Corporation Tax!!!    To the Iceland team... Well done - Ice Pops all round! :-) 

A Finextra member
A Finextra member 26 August, 2022, 08:42Be the first to give this comment the thumbs up 0 likes

If you build up a debt by shopping for food on credit that you need every day but cannot afford out of your own means - when are you expected to pay down the loan? When you get more income - a raise ? When you do not need food anymore? Or is the loan due on every pay-day and no new BNPL can be added until the previous is paid back? Looks like the old soul song lyric "I owe my soul to the Company store"  that described the gloomy back-side of life in an industrial town a hundred years ago where the factory owner owned also your home, the grocery store and more or less everything. And being in debt kept you in line!