Almost one fifth per cent of consumers would use buy-now-pay-later (BNPL) to pay for essential goods, as uptake of the fintech product rises amid increasing scrutiny.
According to a new survey from Hargreaves Lansdown, six per cent of Brits have already used BNPL solutions like Klarna to pay for groceries, and another 12 per cent would consider doing this in the future.
11 per cent of consumers have used BNPL to buy essential clothing such as a winter coat, and another 16 per cent would consider making a similar purchase in the future.
Meanwhile, one in three people have either used or would consider using BNPL to buy things like furniture, technology and white goods.
As BNPL becomes more popular among borrowers, Hargreaves Lansdown has warned that there is a risk that the deferred payment service could be used as a credit line for hard-up consumers.
“The unstoppable surge of BNPL is spilling over into every area of our finances, and 17 million people have already used it to buy something online,” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.
“While it can be a useful way to spread the cost of big one-off purchases, without paying interest, there are some worrying signs that this isn’t all we’re using it for.
“More people are using it to snap up little luxuries they don’t really need, and as prices soar, we’re also starting to fall back on it to cover the cost of the essentials. Both come with real risks.”
Coles added that it is important to remember that BNPL is not yet regulated, which means that struggling borrowers could face steep repayment charges and long-term credit issues.
“If people run into trouble, they don’t have the same protection as regulated borrowing,” she warned.
“If you struggle to repay, you’re subjected to whatever approach the company chooses. If they treat you harshly, the Ombudsman can’t step in and protect you from being hounded or treated unfairly.”
BNPL has been under increasing scrutiny by the City regulator in recent months, and the sector has indicated that it is paying attention.
Last week, Klarna announced that from 1 June it will be sharing customer data with credit reference agencies Experian and TransUnion, in an effort to help lenders to make better borrower decisions.
Former P2P lenders Funding Circle and Fellow Finance already offer their own BNPL products and P2P lender-turned-digital bank Zopa is set to introduce its own BNPL offering soon.