Revolut has announced it will offer a pay later feature, enabling users in Europe to pay for items in instalments, with the feature being rolled out to a selected customers in Ireland from this week.

The digital challenger bank, which claims 1.9m customers in Ireland, said customers using Revolut Pay Later will be able to makes purchases of up to €499 in three monthly instalments, with the first being paid upfront by the customer when buying in person or online.

Revolut Pay Later will be the first buy now, pay later (BNPL) product with an approved limit.

BNPL leader Klarna on Thursday hit out at Barclays for a report in which the bank warned of the dangerous amount of debt customers could build up if they rely on deferred payments.

A fee of 1.65% per purchases will be repaid as part of the final two instalments, and customers will be able to view their Pay Later balance in the cards section of Pay Later hub, which is part of the Revolut app. Customers can also repay early with no additional fees.

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The company said that pending sign-ups for Pay Later, it will look to offer the product in additional markets from the end of 2022.

“Revolut Pay Later gives our customers more control and flexibility over their personal finances, in a responsible way, by enabling them to spread the cost of purchases over three instalments," said Joe Heneghan, CEO of Revolut Europe.

"This encourages people to pay within two months, rather than calling on overdrafts and credit cards which don't carry the same emphasis on quickly paying back the amount borrowed.” 

Revolut estimates that the BNPL market in Europe will grow to £680bn (€790bn) over the next five years and that it will be able to offer a more robust assessment when approving credit limits for customers before they are allowed to make a Pay Later transaction.

Revolut Payments Ireland Ltd booked a €3.3m loss in 2020 due to rising staff expenses (€2.9m) as the company sought to built out its operational capacity, increasing its headcount in Ireland from four to 16 people.

(Pic: Revolut)