Buy now, pay later (BNPL) payments accounted for 3.6 per cent of UK online sales last year, according to research commissioned by BNPL company Klarna.

The report said that there were more than 10 million users of the service in 2020.

The study found that 64 per cent of adults that have used BNPL as a service said the flexibility had helped them manage their finances.

According to the research, if BNPL wasn’t available one third of the value of items would have been paid for via an alternative credit.

But the Financial Conduct Authority (FCA), which is currently working with the government to establish regulation of the credit option, has raised concerns about the payments service. Following a review earlier this year, the watchdog found that one in ten customers of a major bank who use BNPL are in arrears.

“As the report makes clear, during 2020, UK consumers changed their spending enormously, paid down credit card debt and increased overall household savings to £300bn” said Alex Marsh, head of Klarna UK. “At the same time, consumers shopped more online and turned increasingly to buy now pay later as a way to avoid paying interest, increase security when shopping with unfamiliar retailers and manage returns. These factors will be crucial as we look ahead to a retail recovery driven by cautious consumers looking for security, flexibility and convenience.”

According to a report by Wired, although Klarna says it does not charge late fees or interest payments, this relates to the option that gives customers 30 days from the point of purchase to pay for goods in full.

In the terms and conditions section of its website, Klarna says that an interest of 18.9 per cent a year is charged on any balance not repaid by the end of the BNPL period.

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