How has lockdown affected the use of buy now pay later in the UK?

30-second summary:

  • Retail finance, including buy now pay later has increased by 46% over the lockdown period.
  • We cover why exactly buy now pay later has become so popular in recent years and how this has evolved with lockdown accelerating popularity.
  • And how brands are adapting to lockdown and making changes to their policies to ensure the safety and protection of their customers.

Buy now pay later has vast become one of the most popular payment methods available in the UK. With booming success across Europe, Australia and now even the US, the recent UK lockdown only seems to have accelerated its growth in popularity with UK customers.

Research conducted by Fablious recently found that that the use of retail finance including buy now pay later, increased by a massive 46% during the lockdown, when compared to pre-lockdown spending – the biggest winners being brands such as:

  • Klarna (↑38%)
  • Laybuy (↑185%)
  • Clearpay (↑22%)

*Number of transactions

While we already know how and why the pandemic has changed our own lives dramatically, in such a short space of time – what else has prompted such a massive change in our spending and priorities? And why has the use of retail finance and pay later methods been impacted so significantly?

Retail finance, in particular, buy now pay later was steadily increasing in popularity even before the lockdown. With the emergence of brands such as the Swedish bank Klarna which entered UK markets back in 2016 and Australian brand Clearpay in 2019 – paying later has been picking up speed for quite a while now, and it doesn’t appear to be going away soon!

Buying now and paying later provides customers who shop online and now in-store, the freedom to delay or spread the cost of their purchase without the need for a credit card, at just a fraction of the interest you would usually pay.

However, buy now pay later also fulfils many issues that modern online shoppers face – which is no wonder why it’s become so popular with some of the younger generations, such as Millennials and Generation Z.

Asides from getting you what you want when you need it, here’s why else people choose to shop now and pay later.

1. They get more in one purchase

Instead of having to stagger purchases into multiple orders as and when customers can afford them – paying numerous delivery costs. Paying later or spreading the costs of a purchase can help customers to get what they want when they need it in one step.

Paying later is an excellent way for both customers and retailers to get precisely what they need – as the customer receives their order and the retailer receives larger purchases, of which they pay a 2-3% commission to the BNPL provider.


2. It helps them with any sizing difficulties

Getting the sizing right every time can be difficult for many, especially those who are between sizes or growing children. Sometimes navigating the size guide is not always as easy as it’s cracked up to be.

With buy now pay later, customers can purchase multiple sizes that they wouldn’t usually be able to afford, and return the remaining sizes.

3. It’s perfect for large families or busy periods

Larger families and a lot of events cramped close together can be expensive for many households. Birthday presents, school uniforms, Christmas and birthday presents all don’t come cheap.

By spreading the costs over a couple of months, paying later can help to make these hectic times more manageable, seeing that neither customers nor their loved ones go without.


4. You can now shop online and now in-store

When buy now pay later first emerged in the UK, it was predominantly aimed at online customers; now brands are branching out – offering their customers to pay later in-stores too.

While this is a relatively new concept, brands such as Klarna are working with stores and shop-assistants to help them understand the terms and conditions to help customers and make the in-person process smoother.

5. It’s more appealing than other forms of credit

Popular with younger generations such as Gen Z and Millennials, as opposed to Gen X’s and Baby Boomers, aside from the online aspect – there may be another reason as to why youngsters favour these schemes.

Business Insider suggests that the financial impact of the 2008 recession has shaped their opinion towards credit and how they use it. Instead of using forms of credit such as credit cards and short term loans which many may have a negative opinion of – many more are drawn to use pay later schemes.

6. It has more prominent campaigns and marketing

Even if customers haven’t used brands such as Klarna, Laybuy or Zilch, they’ve heard about them. That’s because their marketing campaigns have worked their way onto their screens and in front of their eyes. Whether customers have seen their advert at their local bus stop or when they check out at their favourite retailers.

We all love and use brands that we’re familiar with; it’s a fact. It’s called the familiarity principle or the mere-exposure effect, where people develop preferences to brands and products because they’re familiar to them, and it would seem like it’s working.

According to our data, around 1 in 3 people have been using retail finance for their purchases, spending on average around £560 per year, and with 67 million people in the UK alone, that means that the BNPL industry could be wracking in up £246 million a year in the United Kingdom.

And the popularity of these schemes only seems to be increasing in recent months due to the lockdown, in which customers were spending around 30% more than they were previously from April to June of this year than they did from January to March.

Performance over lockdown:



Why did retail finance perform so well during the lockdown?

While adapting to new circumstances in such a short amount of time, with furlough schemes and higher rates of redundancy and unemployment than ever – our finances and spending has altered and here’s why.

1. Priorities shifting and budgeting

With many individuals and businesses struggling to cope with the impact of lockdown and shutting down of businesses, many were forced to pursue options such as the job retention scheme and furloughing to prevent further losses of revenue for companies which could be devastating. However, this meant that employees were only paid up to 80% of their average salaries.


For many, cuts to wages mean a need to tighten budgets and spending, to keep costs down. While paying bills, groceries and rent and mortgage payments would have been made a priority; other non-essential expenditures would have taken a backseat. Potentially, this makes retail finance an option in the pandemic, where you can stagger payments for purchases instead of paying outright – making them more convenient.

2. Shops closing during the lockdown

During lockdown many retailers were closed during the pandemic, leaving strictly only essential shops open. With many shops closed and people still having a need to shop without the first-hand browsing experience and trying clothes on in person, many could have tried buy now pay later.

Not only is paying later a way that many can afford purchases by spreading the costs, but it can also be an option to ‘try before you buy’ by purchasing multiple sizes or risky items that you’re not too sure will be suitable for you or your home.


And how are brands adapting to current circumstances?

Many debt charities have voiced their concerns about how the current crisis will affect customers’ ability to change – should they find themselves in hard times in the pandemic. As although buy now pay later has low rates of interest and default fees, affordability issues can still crop up and can affect your credit score.

To combat these issues, many brands have made changes to their policies to safeguard against problems with the scheme in the future; these include:


1. Tighter lending policies

As their duty to responsible lending, brands such as Klarna have been adapting their lending policy, tightening lending measures to ensure against customers being unable to make payments or accruing interest and late fees.

These updated policies will ensure that it is more challenging for customers to be approved for buy now pay later if there is a reasonable amount of doubt that they would be unable to pay should their circumstances change.

2. Payment and interest freezes

For policies and agreements that were taken out pre-lockdown or through lockdown where customers’ circumstances have changed, interest and payment freezes have been issued if needed. You can apply for a payment freeze up until the 31st of March 2021.

These freezes, unlike payment holidays – mean that any outstanding money or interest that you owe is frozen for three months, therefore not accruing any additional fees or interest while you are unable to repay.

What do I do if I’m struggling to cope with debt?

The pandemic has meant for some that they are unable to pay their bills, meaning many households have been faced with debts. If you are struggling to cope with your finances because of current circumstances, then it is not advisable that you take out credit such as a short term loan or buy now pay later policy.

Instead, if you are struggling to cope with debts, get in contact with the Money Advice Service or with StepChange for free, impartial help and advice.

Alternatively, you could also look into your options for a debt management plan.


*Sample data taken from anonymous Fablious open banking data, from 324 users over the period of 12/11/2019 until 23/03/2020 compared to 23/03/2020 until 02/08/2020.

**Buy now pay later sample data taken from anonymous Fablious open banking data, from 351 users over the period of 20/05/2020 until the 02/08/2020.

Frequently Asked Questions

What happens when you can’t afford to repay?

If you cannot afford to make a repayment, then get in contact with your buy now pay later provider as soon as possible, as you may be able to apply to freeze your repayments until your financial situation improves. If you can, avoid missing your repayments – as this can result in defaulting fees, negative entries on your credit report and increased rates of interest.

What apps let you buy now pay later?

There are plenty of apps that allow you to pay later or split the costs of your purchases; they include brands such as Klarna, Zilch, Clearpay, PayL8r and many more. For a comprehensive guide of the Buy Now Pay Later brands in the UK, visit our page for more information such as APR and repayment terms.

What should I do if I’m struggling with debt?

If you are struggling to cope with debts, get in contact with the Money Advice Service or the debt charity StepChange for free, impartial advice on your next steps to take.

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