There has been a “significant” rise in shoppers using Buy Now Pay Later (BNPL) services to purchase products, according to the Financial Conduct Authority (FCA).
The financial services company found 27% of UK adults had used BNPL to buy something during the six months to January 2023.
By comparison, just 17% claimed to use the method during the previous 12 months to May 2022.
The FCA indicated shoppers who frequently used BNPL were more likely to be in financial difficulty, including missing bill payments and experiencing rising debts.
Although the finance regulator does not have regulatory oversight over BNPL items, it said it was determined to protect shoppers using financial services where it can.
It added that it was concerned QVC and Paypal shoppers could be at risk due to how some of the contract terms were drafted.
The FCA explained both firms had voluntarily made their continuous payment authority terms easier to understand.
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Hargreaves Lansdown head of personal finance Sarah Coles said: “On paper, the fact there’s no interest to pay on money borrowed this way makes it a very sensible option to help us manage our budgets.
“There’s no doubt that millions of people are taking advantage of BNPL in a way that works for them”.
She continued: “However, for others it becomes a dangerous habit – encouraging them to buy things they don’t really need and can’t afford”.
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