In 2020, buy-now-pay-later barely existed in mainstream British retail. By 2024, over 17 million UK adults had used it. Klarna. Clearpay. Laybuy. PayPal Pay in 3.
These products have one thing in common: they make spending feel free. The debt is invisible. The repayments are small. The psychological barrier to purchase disappears. And the consequences, for millions of younger Brits, are only now beginning to become clear.
BNPL providers make their money in two ways. Merchants pay transaction fees — the retailer pays the BNPL provider a percentage of the sale in exchange for higher conversion rates and larger average order values. And consumers pay late fees and interest on extended payment plans when repayments are missed.
This is the uncomfortable truth at the heart of the BNPL industry: the business model depends, at least in part, on people missing payments. The product is specifically designed to reduce the perceived cost of purchase — which leads to more purchases, and more missed payments.
FCA research has consistently found that BNPL usage is concentrated among younger, lower-income consumers — the group with the least financial buffer when repayments stack up across multiple providers. It is entirely possible to have balances with Klarna, Clearpay, and PayPal Pay in 3 simultaneously, with no single statement showing the full picture.
Multiple BNPL providers now report to credit reference agencies. Missed BNPL payments can damage your credit score — affecting your mortgage rate, rental applications, and other borrowing for years.
BNPL was largely unregulated for years — it fell outside the Consumer Credit Act because repayments were structured to avoid the legal definition of credit. The FCA has been closing this gap, with new rules requiring affordability checks and clearer disclosure. But the regulation is still catching up with the scale of the market.
Audit your current BNPL exposure. List every active balance across every provider — Klarna, Clearpay, PayPal Pay in 3, Laybuy, and any others. Treat each outstanding balance as debt, because it is. Clear them in order of earliest due date or highest potential late fee. Check your credit file with all three agencies for any missed BNPL payments that may have been reported. Stop using BNPL for anything you could not afford to pay for in full on the day of purchase.
Buy-now-pay-later is not inherently evil. Used deliberately, for genuine convenience on planned purchases you will clear immediately, it is neutral. Used as a crutch — to buy things you cannot afford, disguised as instalments — it is debt. Know what you owe. Know what it costs. Know how to get free.
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