The use of 'buy-now-pay-later' (BNPL) services such as Klarna and Clearpay has hit an all-time high as shoppers look to spread the cost of their holiday shopping.
These services allow customers to spread the cost of retail purchases over a number of weeks or months, often with no additional interest.
A new report from credit reference agency Equifax (EFX) showed that a record 28% of the UK adult population (53.6 million) made at least one BNPL repayment in October, up from 23% in December last year.
This suggests about 14.8 million people are using the service now – 2.6 million more than the start of the year.
And there are also signs that the social pressures of Christmas are fuelling BNPL use. One in five (22%) planning to use BNPL say they feel pressure to buy presents for family and friends, and more than a quarter (27%) say they would struggle to afford Christmas without its help.
One in seven (14%) users say it will help them make the most of the sales when one month’s salary won’t stretch far enough.
More than one in 10 shoppers expect to use BNPL over the festive period, with Black Friday (26 November) being a major focus.
Around 10% expect to use BNPL for at least one of their purchases this weekend, more than double the 5% that ended up doing so last year.
Those most likely to use BNPL this Black Friday and Cyber Monday weekend include young people aged 18 to 34 (23%), and people earning more than £50,000 ($66,628) per year (23%).
The report also showed that two in five users report missing at least one payment in the past, and half of them say they have been hit with extra fees as a result.
“While it’s great to see consumers offered a more convenient way to shop in our modern times, BNPL is still a form of borrowing, and it’s important we don’t lose sight of that,” said Jayadeep Nair, chief product and marketing officer at Equifax UK.
He said it can be a useful budgeting tool, and "may soon even help those with thin credit files to build up a healthy credit score."
But as “prices are rising, interest rates are creeping up, and unless wages keep pace, most borrowers will see their finances squeezed over the coming months. The message to shoppers considering using BNPL at the checkout is clear: are you sure you can make the repayments on time? And could you have afforded this purchase without BNPL?”
A report from last month showed almost 8 million Brits who have used BNPL services to shop have outstanding balances that average £538 each — totalling £4.14bn across the UK.
And the UK government has launched a consultation on the services for the first time ever, in a bid to regulate the sector.
Watch: The risks of buying now and paying later