UK shoppers test “Buy now, pay much later” model

A woman uses her card to pay the bill at a restaurant in Milan, Italy October 2, 2020. Picture taken October 2, 2020. REUTERS/Flavio Lo Scalzo

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LONDON, July 26 (Reuters Breakingviews) – Buy Now and Pay Later providers are only beginning to feel the pressure of the cost of living crisis. By mid-June, UK consumers had spent more than £5.6bn through deferred payment service providers. In 2021, it took until October for buyers to get the same amount, according to Credit Karma, a California-based credit reference service.

The increase in activity may sound like good news for industry leader Klarna. However, inflation, which soared to over 9% in Britain in June, means more consumers are struggling to make repayments. Some 41% of buy-it-now-pay-later users had missed a refund this year, compared to just 11% for the same period last year. Delinquencies will only get worse. In October, a price cap on UK energy bills is set to rise, bringing the average bill estimate to over £3,200. The valuation of unlisted Klarna has already collapsed from $50 billion to $7 billion this year. There may be more pain in store. (By Aimee Donnellan)

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Editing by Ed Cropley and Streisand Neto

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