EAT NOW, PAY later? 

That’s the offer from Deliveroo, which is allowing deferred payments and instalment plans for takeaway food and grocery deliveries – but problem debt agency Mabs is urging people not to buy food on such credit.

Deliveroo, a popular delivery app partnered with hundreds of food businesses in Ireland, gives customers the option to pay using the Swedish ‘buy now, pay later’ firm, Klarna – which many cash-strapped younger consumers will already be familiar with as a tempting, interest-free option when buying clothes or electronics online.

Michael Laffey of Mabs, the Money Advice and Budgeting Service, said: “Our advice to consumers would be not to use it for food.”

While Klarna credit is interest-free, missed payments can incur fees and unpaid debts may result in debt collectors being engaged, according to its Irish website.

There has been growing international attention in recent weeks to the risks posed by ‘buy now, pay later’ food deliveries, after DoorDash – which dominates the US food delivery market – announced its own partnership with Klarna. Doordash is not available in Ireland. 

Concerns have been raised that the link-up is a canary in the coal mine of America’s increasingly debt-ridden economy, or even a recession indicator. Klarna has defended the use of credit to buy food in response to the criticism.

Here in Ireland too, people are borrowing more money than ever, with both the volume and value of personal loans increasing last year, the banks revealed last week.

Klarna does not perform the credit checks required by traditional lenders such as banks. The Journal was able to set up a credit plan and make a purchase within minutes, simply by uploading a selfie and an image of a driving licence.

Klarna reported this week a doubling of its net loss for the first quarter. This was partly due to the granting of share-based rewards, although the results also showed an increase in unpaid customer loans.

Deliveroo riders on Camden Street in Dublin. There are hundreds of food businesses on Deliveroo's Irish platform. Alamy Stock Photo Alamy Stock Photo

Repayments

Deliveroo told The Journal that “almost all” of its customers choose to pay in full at the point of purchase.

Klarna credit is available on orders above €35: either a 30-day deferred full payment or three instalments over 60 days. 

Mabs is warning clients at its money management education sessions of the dangers of using ‘buy now, pay later’ for any purchases. The risks highlighted include that consumers can easily find themselves with accumulated debts if they sign up to repayment plans for a number of different purchases.

This type of ‘credit stacking’ is commonplace among Irish ‘buy now, pay later’ users, who tend to be young and already accessing other forms of credit, according to research by the Central Bank of Ireland in 2023. 

Laffey, of Mabs, explained why using ‘buy now, pay later’ for food is a particularly bad idea.

“When buying something like clothes or shoes that have a lifespan, you have the benefit of them for a longer period,” Laffey said.

At the end of the day if you use ‘buy now, pay later’ on your Chinese, it’s gone after an hour – and you’re still paying for it on two or three payments afterwards.” 

“Say you’re going to pay for your shopping over three instalments, interest free – but you’re going to need to do your shopping next week. What are you going to do then? How are you going to fund that when you’re already still paying for last week’s shopping?” Laffey said.

Klarna defends product

Klarna defended its product this weekend as fair and transparent, adding that Irish households had, for decades, relied on credit cards for grocery shopping. It said that by contrast with credit cards, its loans incurred no interest or card fees, adding that it offered “friendly reminders” that made it easy to manage payments. 

Klarna said it performs a “soft credit check” on customers, only increasing the amount of credit available if consumers demonstrate healthy repayment behaviour, and shutting off credit if repayments are not made.

Groceries as well as takeaways are available on Deliveroo, with Centra, Spar, Marks & Spencer and Dublin grocery delivery firm Shuppa all signed up to the delivery app.

Sean Meagher, CEO of Shuppa, said that while the firm doesn’t offer Klarna itself, some customers – especially those buying a larger basket of goods or non-food items such as gifts – find “payment flexibility” useful.

“That’s part of the convenience marketplaces like Deliveroo offer,” Meaghar said.

He added that Deliveroo charges platform fees that are passed along in prices.

The Central Bank, which regulates ‘buy now, pay later’ services in Ireland, said it expects lenders to ensure terms and conditions are clear and transparent for customers.

The Central Bank’s research on ‘buy now, pay later’ in Ireland found phones, clothing, footwear and cosmetics were among the products purchased. Almost one in five said they wouldn’t have made the purchase if this form of credit was not available.

Over a third did not realise that ‘buy now, pay later’ was a form of credit.

Other grocery firms operating on Deliveroo have been contacted for comment.

The Mabs national helpline for anyone struggling with debt or money management is 0818 07 2000, open Monday to Friday from 9am to 8pm. The Mabs website is www.mabs.ie.