More Britons than ever are turning to buy now, pay later services as the cost of living continues to rise, new research has revealed.
The number of customer transactions with Klarna alone increased 59 per cent in the 12 months from 1 December 2020, according to data from TSB.
Some 18 per cent now use BNPL at least once a month, with 11 per cent saying they use it at least once a week.
It comes at a time when inflation and the cost of living are causing households major concern with 31 per cent of people feeling less confident in their financial situation as a result.
The number of TSB customer transactions via Klarna alone increased by 59% in the 12 months
TSB used its internal data to find out how its customers were spending over the past year as well as completing a survey of 5,000 adults in December 2021.
The findings show that 82 per cent of people have already experienced an increase in their costs of living such as increased cost of groceries, day-to-day essentials and gas and electricity.
Energy prices have soared in recent times, thanks to rising wholesale costs, which has pushed prices up by hundreds of pounds for millions of consumers.
Fresh food costs are also rising at their fastest rate in almost a decade whilst homes can also expect to see increases in national insurance, council tax, rail fares and mortgage repayments.
As a result, 23 per cent said they have dipped into savings whilst 19 per cent say they changed their usual habits or behaviours such as changing shopping habits and 36 per cent have cut back on spending on non-essential purchases.
Another 19 per cent have increased debt either by taking out new credit, increasing existing credit or going into their overdraft.
Against this background, BNPL services continue to grow in popularity, with many consumers using Klarna, Clearpay and others to spread payments or pay later.
Of those who use BNPL, one in four say they rarely have the money in their account to pay in full for the things they are buying.
Research also suggests that some people using BNPL are doing so when they are struggling financially.
Experts are increasingly warning the danger these services pose to users – especially younger audiences.
Inflation and the cost of living are causing households major concern for the new year
The findings revealed that renters have been hit the hardest by rising costs.
Of those who are struggling, 83 per cent are renting compared with 15 per cent who are homeowners.
To improve their financial situation, 55 per cent say they are likely or highly likely to cut back on spending whilst 18 per cent may take out a loan.
Despite these concerns, Britons’ money confidence in managing their money, making plans for the future and choosing the right products and services generally remains consistent with the previous iteration of TSB’s Barometer, with 36 per cent maintaining and 36 per cent increasing savings since June 2021.
The research also found that 67 per cent who use online banking feel more confident with their money as a result of being able to easily check their bank balance, use it to help with budgeting and avoid going into their overdraft.
Another 42 per cent say using online banking helps them save money every month – £166 on average.
Mark Curran, customer banking director at TSB, said: ‘It’s clear that many people are concerned about the impact of bills going up and rising inflation.
‘Now is the time to really get on top of your finances and research shows that many people are able to save money and budget better by using digital banking.
‘We know that many of our customers need support and we’re delivering new tools and features that will help them to develop confidence with their finances.’
The price of living is going up with fresh food prices rising at fastest rate in almost a decade
Budgeting tips to help with rising costs
1. Find out what you’re really spending: As prices and bills rise, now is the time to find your where your money really goes. Look through your statements or use the digital tools from your bank to find outgoings like direct debits and subscription services.
2. Don’t delay: Cancel payments for anything that you no longer need or looking for cheaper alternatives.
3. Make use of online banking if you can: TSB research shows that 67 per cent of those who use online banking feel more confident with their money.
4. Try Open Banking: Data shows that consumers who use Open Banking feel more in control of their finances as they can see all their accounts in one place.
5. Talk to your bank if you need help: Most banks offer services to help their customers in need including offering budgeting advice.
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