UK consumers spent £2.3bn over the holiday season via buy now, pay later options such as Klarna.
In Brief:
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Credit Karma reports an average of £170 was spent per person.
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This reportedly made up 40% of all “festive shopping”.
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Consumers will be paying for their Christmas shopping in installments over a period of weeks and months.
What does this mean?
FinTechs such as Klarna, Clearpay and Laybuy, which offer consumer credit by fronting the cost of items and allowing this to be paid back in installments, have grown in popularity over the past year. Now, even PayPal has got in on the act, offering Pay in 3.
Unlike credit cards for example, the loans are set up at the point of purchase, don’t charge interest as long as payments are made on time, and generally don’t impact credit scores – unless a customer defaults.
Their growth is partially due to the increased popularity of online and digital payments which goes hand in hand with their seamless process, but in addition to this many UK consumers will have suffered financially due to the pandemic so won’t have been able to dip into savings for Christmas shopping. To some, it’s a handy solution and an easy way to manage money, but the UK media has called these solutions “controversial” and warned of “unmanageable debt”.
