British shoppers have spent GBP5.8bn in ‘buy now, pay later’ (BNPL) deals and accumulated over GBP4bn worth of debt this year, according to new research.
Around 11.6mln Britons have used BNPL schemes, of which 7.7mln of those have racked up significant outstanding balances, averaging GBP538 per user, research by Credit Karma has found.
BNPL has become increasingly popular in recent years, helped by new technology from companies such as Klarna, Affirm, and Afterpay, which allow customers to BNPL with zero interest if they pay on time.
The new research follows a Bain report that calculated GBP6.4bn was spent via BNPL transactions in 2020, up at least 60% from the year before.
Klarna, which was valued at US$46bn when it raised US$639mln in a funding round led by SoftBank, this week struck a new partnership with payments company Stripe Inc in a deal that is expected to further accelerate the growth of BNPL.
However, as Credit Karma warns, many consumers are not aware they could get into more debt meaning BNPL services could contribute to “an opaque debt bubble”.
Shoppers that have been using BNPL schemes already who have missed their repayment dates on the ‘pay later’ part have since had loans and mortgages being rejected due to their credit score falling because they failed to repay in time, said Credit Karma, a financial website that facilitates accessing your credit scores and credit reports.
Ohio-based Klarna is reported to be examining a possible stock market listing.
