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Millions of UK shoppers would struggle to pay for Christmas without buy now pay later

Millions of UK shoppers would struggle to pay for Christmas without buy now pay later
Matt Browning
Written By:
Matt Browning

A third of buy now pay later users would struggle to afford Christmas this year without the help of the payment scheme, a credit report agency finds.

One in three (32%) will also spread out their gift costs during the festive season as well as on Black Friday or Cyber Monday.

This year, around half (48%) of UK adults adopted payment apps like Klarna and the ‘pay in three’ option on PayPal to pay for products later down the line. It’s a rise from 34% in 2021 and equates to an estimated rise of 7.4 million people in the UK who’ve dipped into using ‘BNPL’ for the first time in 2023.

Reliance on the short-term financing method is increasing and so are the amounts being spent. Equifax data found the average monthly BNPL expenditure rose by almost 50% since 2021 – surging from £105 to £153 in 2023.

With spending at Christmas naturally spiking, it’s expected the monthly average will surpass the £172 customers used to pay for items in instalments last December.

Half of under 35s have missed BNPL payments

However, as the number of shoppers who have used the various schemes grew, so did the amount of debt. A total of 17% of the 2,000 respondents surveyed by Equifax said they had missed a payment this year using BNPL.

This was most common in the top users of BNPL, 18 to 34-year-olds, where almost half (46%) failed to meet a payment deadline at some point. In August, the Bank of England predicted three million households in the UK were in the same boat.

With Christmas approaching, 34% of 35 to 55 year olds expect to rely on BNPL the most to pay for everything the festive season entails in the next month. Meanwhile, the number of over 55s using the financing method has more than trebled in two years, rising from 4% in 2021 to 13% in 2023.

As families battle the cost-of-living crisis, staggering payments to pay for goods – some for takeaways and even medical bills – has become a contentious issue. There is also no regulation into BNPL transactions and anyone can opt to pay for products in this way.

Calls for regulation on buy now pay later schemes increase

Craig Tebbutt, chief strategy and innovation officer at Equifax UK, said: “Over the last three years, we have witnessed a surge in BNPL use by consumers, and the products have become an essential part of many people’s shopping experience.

“However, while consumers are using BNPL more and making bigger payments on BNPL, we’re seeing a slower growth this year, compared to last. It’ll be really interesting to see in the next year or so how BNPL trends respond to the changing economy.

“As with any form of credit, when shoppers use BNPL, it can be a great budgeting tool, or way to spread spending out over the festive period.”

Tebbutt added: “Shoppers should treat BNPL in the same as other types of credit: make sure you can afford the repayments and educate yourself on the risks. Caution from both lenders and consumers needs to be taken to ensure repayments can be made. Equifax supports the call for regulation for BNPL, as not only will it protect consumers, but also help those with thin credit files to build up a healthy credit score.”