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Remember lay-by's?

I am probably showing my age here, or maybe it is more of an Aussie thing, but lay-by used to be my best friend. In particular, I remember when I was in my early twenties and preparing to move out of home, I lay-by'ed everything. Toaster, kettle, bedding, towels, pots, pans. You name it. I would pay the deposit, then go back in store every few weeks and pay them off in instalments over a few months. More than ten years, and three countries later, some of these items are still with me.

Ask someone in their teens, or early twenties however, if they know what a lay-by is, and you will probably be met with a strange look. Why? Because they can buy now, pay later of course.

The buy now, pay later model

I am sure you have heard of Klarna. Back in Australia it is known as AfterPay. Whatever the name, they are all derivatives of this instantly gratifying, ‘buy now, pay later’ mentality. Brands and retailers such as Boohoo, ASOS, H&M, and Nike, are all offering the service. You can't miss it on their sites, with cringey catchphrases like Boohoo's "You heard it here first hun... we've got Klarna", and ASOS "Buy what you like. Pay how you like with Klarna". These buy now, pay later services offer just what they suggest - the opportunity to receive your purchase before your first payment is even due.

Klarna specifically offers it's customers the ability to pay for an item in instalments, without having to pay fees, with these instead being covered by the retailers. The item itself, well that can be delivered, at times, the next day.

So what is some of the consumer psychology behind the buy now, pay later model?

Perceived affordability

The basis of these services' appeal is their ability to make money seem manageable, and therefore seem affordable, spreading the cost of more expensive purchases. Therefore, a €300 jacket you have had your eye on looks far more appealing and less scary when it becomes four easy payments of €75.

Frictionless payment methods

Klarna, and other similiar services, reduce the resistance that we feel at the checkout, and that often leads us to abandon carts at checkout. We have all been there. You may even have a cart sitting waiting to be checked out as you read this (guilty 🙋‍♀️). Normally, if you don’t have the money, you don’t go through with a purchase. But these services change that as affordability goes right out the window.

Monopoly money?

Have you even found paying with contactless or a gift card easier than paying with cash, despite still being money? With these types of transactions, no cash is actually leaving your wallet, so there is a reduced sense of loss.

A study conducted by Raghubir & Srivastava (2008) supports this notion, finding that a less transparent form of money, such as the aforementioned credit or gift card is more likely to be treated as play money, and therefore more likely to be spent than the same amount of cash.


We are primed to act quickly if there is any chance we may miss out. The buy now, pay later model further fuels, and capitalises on this fear, encouraging us to make snap, and not always the best, decisions.

Check out my earlier posts Stepping off the (hedonic) treadmill, and Patience is a virtue for an explanation of some of the basic psychology behind our over-consuming ways, and some simple ways we can break the cycle.

Please GET IN TOUCH or leave me a comment, and let me know if you have had any experiences with the buy now, pay later model.

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