15 million UK consumers are buying now but paying later
Nearly 15 million consumers are using buy now, pay post credit, up nearly a quarter from a year ago.
28% of adults paid off a loan at least once with a rapidly expanding loan last month.
Research by Equifax, the credit data company, found that 2.6 million more people used providers including Klarna, Clearpay and PayPal compared to December of last year, a 23% increase.
A flurry of major financial institutions and digital lenders have entered the space recently, from Revolut and Monzo to Barclays in the US and Goldman Sachs in combination with Apple.
Proponents of buy now, pay later say it benefits consumers because it’s cheaper overall than credit cards, while critics say it increases the likelihood of debt, especially in young people by encouraging them to spend more.
The product allows customers to pay for goods in installments with an interest-free loan. Suppliers finance loans through fees from registered retailers as they generate more sales from customers. The Treasury is consulting on ways to regulate the sector.
Equifax found that the total amount the average user pays back each month has increased from £120.35 last December to £125.32 last month. Its research also shows that one in ten shoppers are expected to use buy now, pay later in the run-up to Christmas. A total of 27% said they would have a hard time getting their Christmas shopping done if they didn’t use a longer time to pay for their purchases.
Citizens Advice said it “calls on the industry to urgently regulate to ensure consumers are properly protected”. Kate Hobson, consumer expert at Citizens Advice, advises consumers: “Make sure you understand what you’re signing up for, how you’ll be making returns, and what if you cannot pay on time”.
Equifax analyzed data from 8,700 checking accounts and 2,000 consumer interviews.