Buy now, pay later credit up nearly a quarter

More than 15 million consumers are using buy now, pay later credit, up nearly a quarter from a year ago.

Twenty-eight per cent of adults made at least one repayment using the rapidly expanding form of borrowing last month.

The credit data company Equifax found that 2.6 million more people used providers like Klarna, Clearpay and PayPal than last December, a 23 per cent increase.

There has been a recent stampede of large financial institutions and digital lenders into the sector, ranging from Revolut and Monzo to Barclays in the United States and Goldman Sachs in combination with Apple.

Supporters of buy now, pay later say that it is positive for consumers as it is cheaper than credit cards, while critics say it increases indebtedness, particularly among younger people by encouraging them to spend more.

The products allow customers to pay for goods in instalments using an interest-free loan. The provider funds the loan through fees from retailers, which sign up as they generate more sales from customers. The Treasury is consulting on ways to regulate the sector.

The total amount repaid by an average user each month had gone from 120.35 in December last year to 125.32 last month, according to Equifax. One in ten shoppers expected to use buy now, but pay later in the run up to Christmas, according to the research. A total of 27 per cent said they would struggle to afford Christmas without using the longer time to pay for goods.

Citizens Advice said it was calling for the sector to be regulated to make sure consumers are protected. She said that consumers should make sure they understand what they are signing up for, how you will make the payments and what will happen if you don't pay on time.