Consumers are increasingly turning to buy-now pay-later (BNPL) products to manage their finances amid a cost of living crunch, fresh research has revealed.
BNPL products offered by firms like Klarna, Clearpay and LayBuy, which allow shoppers to spread payments across a set period, have soared in popularity during the pandemic.
A survey of British shoppers found that 41 per cent opt for BNPL due to a lack of interest charges, 22 per cent chose the products due to improved cash flow management while 28 per cent use it to help them budget, according to research by a financial services consultancy firm RFI.
Kate Wilson, head of consumer credit at RFI Global said shoppers were opting for BNPL to avoid the costs of traditional credit amid soaring inflation.
“The majority of BNPL users are millennials who want to manage their money more efficiently and avoid debt,” she said.
“BNPL’s simple credit model provides a convenient way for them to spread the cost of some purchases over a number of weeks or months in equal payments, assisting with budgeting without resorting to a loan, going overdrawn or putting the expense on credit cards. They can buy what they want, when they want, and take full advantage of promotions or sale items.”
But the research comes amid growing concern over the use of BNPL products in plunging consumers into debt.
A recent YouGov survey commissioned by the debt charity StepChange suggested that a third of BNPL users have two or more outstanding loans, while research by Citizens Advice last summer found that 10 per cent of BNPL shoppers has been chased by debt collectors.
Government is preparing to clamp down on the sector with regulation expected later this year.