BNPL: Usage of buy-now pay-later with firms like Klarna rockets – but does it ease shoppers’ cost-of-living burden?
Buy-now pay-later (BNPL) usage rocketed last year as over four million new shoppers took to the products in a bid to shield their wallets from the soaring cost of living, new data shows.
The use of deferred payment tools, offered by companies like Klarna, Clearpay and Laybuy, soared as costs spiked and some firms rolled out new offers in areas like food and essentials.
Over 4.1m shoppers used the products for the first time in 2022, with over a third of UK shoppers now having used BNPL – up from 26 per cent in 2021 – data from Equifax, one of the UK’s biggest credit rating agencies showed.
The figures reveal the scale of BNPL use in the UK as concerns spread among debt campaigners that consumers are landing themselves in mounting piles of debt through the unregulated products.
Does BNPL really help shield shoppers?
However, bosses at Equifax said today that there was little in its data to suggest that the products were doing “more harm than good for UK consumers”. They warned that missed payments would dent shoppers’ credit scores in future, however.
“Consumers will find missed BNPL payments appearing in their credit reports next year, so it’s vital that anyone using it sees it as the credit product that it is,” said Jayadeep Nair, chief product and marketing officer at Equifax UK.
The figures come as regulators prepare to move in on the sector this year. However, the plans have been beset by delays, with the Treasury missing a self-imposed deadline to consult on draft legislation at the end of the year. A Treasury spokesperson told Morning Wire yesterday a consultation would be launched “in the coming weeks”.
The expansion of BNPL products into new areas has also unsettled some debt groups as the cost of living rises. Klarna and Deliveroo in October announced a tie-up that would allow people to split and defer the payment of food orders through the app in a move that was branded “irresponsible” by some personal finance campaigners.
The firm hit back at critics and told Morning Wire: “People have been paying for food deliveries with credit cards and overdrafts for decades but they’ve been stung by rip-off fees and extortionate interest so it’s time consumers had the choice of a healthier alternative where they only ever pay the original cost of the purchase.”