UK supermarket deploys BNPL loans to cope with rising food prices
With many of its customers struggling with a cost of living crisis, British supermarket chain Iceland is rolling out an uninspiring BNPL product for use in its stores.
The Iceland Food Club allows members to apply for microloans of £25 to £100 on a preloaded card, which can be used at any company store.
Loans are repaid at the rate of £10 per week, on the day chosen by the member, and are available in six annual periods coinciding with school holidays when family finances are usually at their worst.
Critics have accused Iceland of encouraging customers to spend more than they can afford. Labor MP Stella Creasy, who has long campaigned against payday lenders, tweeted that the initiative was “deeply dishonest”.
deeply hypocritical @IcelandFoods – Offering your customers a BNPL option to pay for food does not help during the cost of living crisis. This is by exploiting the evidence that consumers are spending more to spread out payments and the lack of consumer protections to manage the debts they accumulate! #the Sharks https://t.co/iRgk6tMH4B
— stellacreasy (@stellacreasy) August 16, 2022
However, Icelandic boss Richard Walker defended the Food Club, saying the critics are “middle-class people who themselves have no difficulty accessing traditional banks and would not hesitate to pay for their own store weekly with a credit card“.
Walker says the Food Club was developed in partnership with FCA-regulated Fair For You, a charity-owned ethical lender.
The initiative is also not an impulsive “thinking wave” and has been tested over 18 months of regional pilots which found that 95% of participants found it useful; 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.
According to Walker: “All the evidence we have obtained from our own trials – and research into the widespread use of microcredit around the world – shows that it is a really useful way to manage low and irregular income. , and to improve participants’ quality of life and self-esteem.”