Usage of buy-now-pay-later (BNPL) services has exploded over the past year with nearly a fifth of UK adults now using the services once a month, according to new research.
BNPL services from firms like Klarna and Clearpay surged in popularity through the pandemic as shoppers looked for ways to spread their money further.
Around 18% of adults now use BNPL services once a month, while 11% say they use it at least once a week, according to internal data from TSB, the bank.
The number of customers’ transactions via Klarna alone had increased 59% since 1st December 2020, according to TSB.
But the sector has come under the scrutiny of regulators in the past year over fears that it is ladening consumers with unaffordable levels of debt.
TSB’s research showed that a quarter of those who use BNPL say they rarely have the money in their account to pay in full for the things they are buying.
A recent YouGov survey commissioned by the debt charity StepChange suggested that a third of BNPL users has two or more outstanding loans, while research by Citizens Advice last summer found that 10% of BNPL shoppers has been chased by debt collectors.
The Financial Conduct Authority (FCA) announced plans last February to regulate interest-free BNPL payments after usage of the services nearly quadrupled in 2020 to £2.7bn.
The decision was made as part of an FCA review into the unsecured credit market, carried out by former interim chief executive Christopher Woolard.
Recent Treasury documents however have said that there is ‘relatively limited evidence of widespread consumer detriment’ at this stage.
Plans to regulate the sector are currently under consultation and due to close on 6th January.