Buy now pay later: How does it work?

More people are opting to use buy now pay later (BNPL) services for their shopping than last year, according to new data revealed to Panorama.

An estimated 15 million adults of all ages in the UK are actively using this form of credit, an increase of more than two million since the start of the year.

Among them are about 30% of all 20 to 30-year-olds, research by data company Equifax suggests.

However, there are concerns some people are spending more than they can afford.

What is buy now pay later?

It’s a form of short-term financing, which has become increasingly popular.

Rather than paying the full amount of your purchases, BNPL allows you to spread the cost into smaller amounts over a short period of time, usually weeks or months.

The major players in the industry are Klarna, Clearpay and Laybuy. They have been joined by PayPal, which recently launched its own pay later model, while Monzo is one of the first UK banks to enter the market.

For most people, buy now pay later can be a convenient way of spreading the cost of their shopping.

But as the industry grows larger, the voices of concern are getting louder.

There are fears shoppers are spending more than they can afford and adding to existing debts, which they might already be struggling to manage.

More than 17 million have used buy now, pay later

How does buy now pay later work?

Choosing buy now pay later at the checkout of a participating retailer means the bill will be paid for in full by the BNPL provider.

That leaves the customer required to repay them, usually in instalments over a short-term fixed-payment schedule, and interest-free.

Most providers will charge a fee for any missed payments, and these can accumulate if more are unpaid.

Terms and conditions vary between companies.