Challenging Reads – Understanding Buy Now, Pay Later T&Cs

NerdWallet has analysed how long it takes to read the Terms & Conditions and privacy policies of popular buy now, pay later apps'. The study revealed it takes an average of 36 mins to read buy now pay later apps' T&Cs. We review how long it takes to read leading providers T&Cs.

John Ellmore Published on 24 March 2021. Last updated on 07 April 2021.
Challenging Reads – Understanding Buy Now, Pay Later T&Cs

Credit is easier to get than ever. With accounts targeted at all ranges of credit score, almost anyone can find themselves with an account, and as “buy now, pay later” schemes grow in popularity, it’s never been easier to delay payments to a later date.

While useful for security and in many cases offering other benefits depending on the provider and account, credit is always a risk and is one of the main sources of debt worldwide.

The team at NerdWallet has analysed Terms and Conditions and Privacy Policies of 11 buy now, pay later companies, to reveal how long they would take an average person to understand. We have looked at their length and how clear the writing is, according to Grammarly. In addition, NerdWallet spoke to the financial wellbeing fintech Dreams to understand the risks of such apps that users must be aware of.

Klarna tops the list with the longest policy document to read at a staggering 57 minutes

The average reading rate for a native English speaker is 238 words per minute. Using the number of words in each set of T&Cs, the average time-to-read these documents across the 11 services totals over 36 minutes!

But while a little over half an hour might not be incredibly unreasonable for detailing all the relevant parts of a credit contract, the clarity of the document raises questions: based on analysis of the wording used and the style of the documents, the average Terms & Conditions scored only 60% for clarity.

Take a look at the full table below to see a full analysis of each app’s T&Cs and privacy policy:

Challenging Reads

The most time-consuming document to read comes from Klarna, the popular Swedish payment service. At 57 minutes for a standard reader, it’s a significant time investment to understand its terms – and it’s not helped by the writing style, as the clarity of the text scored only 48%.

To put the length of these documents in context of how you could be spending your time otherwise, you could fit an episode of The Crown into the same time, or at least 2.5 episodes of popular sitcoms and animated shows like Rick and Morty, The Simpsons, or Friends.

And while it would take a shorter time to get through at 41 minutes, UK finance brokers Payl8r have the lowest clarity in their writing at only 39%. Zilch, another UK company, had the second-longest terms and conditions, taking an average reader 48 minutes to get through. Its clarity score of 54% was also below average, likely extending that reading time even further – or making it easy to miss important points when reading through in a shorter time.

Friendly Terms

At the other end of the scale, London retail payment system Zip has both the shortest and clearest terms, taking only 21 minutes to read for an average native english speaker, and a clarity score of 92%, making it a comparatively easy read in the payment market.

Remarkably, Zip’s clarity wasn’t nearly matched anywhere else; the next easiest-to-read terms come from PayPal Credit, where clarity scored at 74%. The payment giant did also have a nearly average word count, meaning the terms could be finished in roughly 35 minutes – not enough time to finish a single episode of Breaking Bad, Stranger Things or The Crown, though you could still fit the better part of two episodes of a comedy show in the same timeframe.

Most people don’t consider reading T&Cs and privacy policies as ‘fun’, yet it’s one of those things that really should be done. To put it in perspective, how long you can expect to spend reading these terms, we have compared it to how many episodes of popular TV shows you could watch in the same timeframe. Take a look below:

Managing your Finances

Reliance on credit and the debt that comes with it has only been exacerbated by the current pandemic. As a result, it’s more important than ever to make sure that everyone can understand what they’re signing up for, and the possible dangers involved in paying by one of these methods.

It’s also important to know how your data is processed when using these services. Some of these policies are likely only to be gathering personal data for analytics purposes, as is standard on many websites, but some policies may have other effects – for example, Klarna’s Privacy Policy differs if you’re an employee at a store that works with Klarna. They also check your details against a list of “Politically Exposed Persons” to track corruption and bribery.

Although these aren’t harmful policies, they are deep within the terms and conditions and can be easily missed due to the size and lack of clarity of the documents – something worth considering when signing up for a finance service.

As debt becomes increasingly normalised due to the growth in popularity of the “buy now, pay later” schemes, it’s important to remind people of the importance of being aware of your finances. While these schemes are appealing, particularly to younger generations, they can also be extremely dangerous as it’s a slippery slope and can result in serious money issues.

It’s also important to consider the effects of these schemes on both your mental health and the way you approach finance.

Elin Helander, Chief Scientific Officer at financial wellbeing fintech Dreams, says:

“Perhaps the most fundamental problem with these schemes is that they normalise the borrowing of money which, in turn, fuels a society driven by overspending and present bias, which is the tendency to favour immediate rewards at the expense of long-term goals. In behavioural economics, people are often defined as being “loss averse” and present-oriented because our brains are designed to prefer avoiding losses and to instead seek instant gratification, which is why the concept of “buying now, paying later” is such an appealing one.

“The fact that our brains function in such a way is what makes buy now, pay later schemes the biggest threat to our financial wellbeing, by inhibiting our ability to save money and plan for our future selves, and perpetually trapping us in unhealthy financial habits. Self-control is a strong predictor of good financial habits, and these schemes are certainly not helping us in this sense.

“At a time when people are experiencing a great deal of financial anxiety due to the pandemic, I believe that banks, financial institutions and other payments services have a duty to look after their customers’ wellbeing, and equip them with the necessary assets and debt management skills to change their spending habits for the better.”

Avoiding Predatory Practice

While debt is often unavoidable, it is possible to stay on top of it in most cases by paying close attention to your finance provider’s terms.

It’s all too easy to skip past long documents and take the advertising at face value, but it’s important to realise that your finances are at risk, and anything you don’t pay upfront you will still need to pay later, and likely cost you more when you do.

These schemes should be viewed as stopgap solutions when a purchase is necessary but current finances do not allow. They can be very useful in the right context, but relying on them for all purchases can lead to a lack of awareness of the reality of your finances and runs the risk of unmanageable debt. This highlights the need and responsibility for firms to provide simple and clear terms and conditions as consumers who use these products are more likely to be under some form of financial pressure.

However long it takes, reading through the terms before signing up to a credit scheme will be time well-spent, helping you to know what you’re agreeing to and reducing the number of unwelcome surprises when it comes to paying the bills and checking your account.

Methodology and sources

The research was carried out between 2/3/2021-9/3/21. This study examines how long it takes the average person to read the terms and conditions of popular buy now, pay later apps. Desk research was carried out to find the most popular apps in the UK. The Terms and Conditions and Privacy Policies for each company were pasted into a GoogleDoc, to determine the word count. For Splitit the T&Cs for shoppers were analysed, along with its privacy policy, to ensure it was appropriately comparable with the other companies analysed. To compare PayPal's Credit offering with the other companies, the terms and conditions of only its buy now, pay later offering was analysed. To be able to view these, an application was started but not completed, as they were not readily available on the site. Grammarly was used to determine the clarity of each document. To calculate how long it will take to read the T&Cs, we divided the total word count for each company by 238 (the average number of words read per minute in the UK). Lastly, to compare the length of the documents to popular TV shows, a seedlist was used and a few TV shows randomly selected.

Image Source: Getty Images

About the author:

John Ellmore is a director of NerdWallet UK and is a company spokesperson for consumer finance issues. John is committed to providing clear, accurate and transparent financial information. Read more

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