BRITS should BEWARE of massive debt risks as Zopa jumped onto the Buy Now Pay Later market today.
The loan company has introduced its own BNPL schemes like Klarna – which let customers spread their shopping costs across monthly instalments – but money experts have issued stark warnings.
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The method of payment means you can pop a sought-after item straight into your basket when shopping online and the cash won’t come out of your account in one lump sum.
BNPL allows hoppers to splash out on goodies that would normally take months to save up for when funds are looking low.
Yet industry experts are terrified shoppers are rapidly falling into debt through the schemes.
An estimated eight million adults owe money on BNPL purchases, according to most recent figures from reference agency Credit Karma.
Shoppers are sinking in an average of £538 per person, with £4billion owed in total.
And nearly two in five of BNPL shoppers have borrowed money to pay back their debt, according to Citizens Advice.
A quarter relied on credit cards, with others reaching out to friends and families, leaning onto loans or dipping into overdrafts.
Young people are the worst culprits, as over half of 18-34-year-olds borrowed to pay off BNPL debts, compared to 39 per cent of 35-54-year-olds and 24 per cent of over-55s.
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The most popular BNPL providers – Klarna, Clearpay and Laybuy – have been up and running for a while on websites like H&M and ASOS.
The UK’s BNPL market is worth £6 billion and 20million already use this way of shopping.
But the market is set for shock waves when Apple arrives on the scene in autumn.
The tech titan will launch Apple Pay Later on its new iPhone in the US that will work wherever there is Apple Pay both online and in stores.
The move will allow people to split payments on their phone into four instalments, over six weeks.
Zopa, which launched its BNPL today, focuses on big ticket items worth between £250 and £30,000 to help consumers reach their dream purchases.
NatWest is also planning on rolling out the service from this summer, following HSBC and other banks in offering the payment option.
Amazon as well teamed up with Barclays to offer BNPL for orders over £100.
Citizens Advice are now calling for more regulation to protect consumers, expecially as one in 20 BNPL shoppers don’t fully understand how the repayments worked.
Millie Harris, a Debt Adviser at Citizens Advice East Devon, said: “It’s just relying on one debt to pay off another debt.
“It’s heartbreaking to see parents who can’t afford their children’s clothes or shoes, turning to Buy Now Pay Later, thinking it’s doing them a favour.
“In reality it’s just more debt and more creditors, on top of what they’re already facing.
“What scares me most is how easily people can slip into using Buy Now Pay Later.
“They come to rely on it much more quickly than other forms of credit. It’s just a few clicks at a checkout.
“Too often that means people don’t realise how serious it is; that it is credit and there are consequences if they don’t repay it.”
Dame Clare Moriarty, Chief Executive of Citizens Advice, added: “The spiral of debt from Buy Now Pay Later to credit cards, loans and even payday lenders shows it’s not a risk-free alternative.
“Buy Now Pay Later is part of the credit industry and must urgently be regulated as such.”
