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Mar 12, 20215 min read

BNPL and the new economic landscape.

by Alex Marsh


We know how hard it is to keep up with the many stats and facts flying around about buy now, pay later (BNPL) in the UK, especially since not that many are actually accurate! It’s a new and fast-growing sector and much of the information available is piecemeal and inconsistent. 

That’s why we decided to ask Capital Economics to delve into the UK market for an independent report that would draw a true picture of the BNPL revolution taking place in the financial service sector. So, what did we learn? Here are just some of the key findings from the BNPL and the new economic landscape report, which you can download here



Our lives have changed, and so have our habits.

It’s been a tough  year for the retail sector, but finally the outlook looks brighter as the UK economy gears up to reopen in the spring. While retailers will play a key role in driving the economic recovery, the pandemic has had long-lasting impact. Retailers – and everyone else really  – will have to adapt to our ‘new normal’.

As consumers, we’ve drastically changed the way we shop, pay, save and engage with brands over the past year. Some existing trends – which we’ve already experienced first hand at Klarna – have accelerated, in particular when it comes to online shopping and new ways to pay, with BNPL solutions playing a key role.

Perhaps unsurprisingly, 2020 saw online retail sales soar by 32%, online transactions leapt from 20% to 30% of overall retail sales and consumers continued falling out of love with both credit cards and cash to pay for purchases. And despite being a tough year, on average, households were able to triple their savings to £300 billion from £100 billion in 2019.

Consumers who were fortunate enough to keep a secure job and increase their savings during the pandemic will be critical to the nation’s economy, but they’ll be very cautious about how they spend their money – and understandably so. Now, more than ever, they will also be looking for payment solutions which can give them control over their finances as well as security, flexibility and ways to avoid unnecessary costs. This is driving a shift from credit towards debit and unlike “traditional forms of credit”, BNPL is perfectly suited to meet these new consumers’ needs.

The growing popularity of buy now, pay later.

In the UK, over 10 million people used BNPL services to buy something online in 2020. However, while BNPL is growing rapidly (along with Klarna), we are very much at the beginning of this journey, with BNPL transactions in the UK representing less than 2% of all credit card transactions in 2020. 

Even so, this 2% already represents huge benefits to consumers. If all BNPL purchases in the past year had been made using a credit card, it could have cost consumers a whopping £76 million in interest charges alone, not to mention other charges like missed payment fees or membership fees. As BNPL increases its share of the market, there’s the potential for consumers to save hundreds of millions of pounds in interest and fees each year.

But BNPL is so much more than a credit card substitute. With one third of people saying they would have made purchases without credit if BNPL hadn’t been an option, it’s clear that other benefits including flexibility, security and convenient returns are key reasons to choose BNPL. 

There’s still work to be done.

Of course it’s not all unicorns and fairy dust. As the BNPL sector continues to grow at pace, there are lots of new players with wide differences across eligibility checks, payment schedules, customer protection and fees. There is a lot of room for confusion and something the industry needs to address, particularly when it comes to giving consumers the information they need to make the right choices for them – and making sure they are also protected if something goes wrong. This is why we welcome regulation and we look forward to working together with the FCA, the government and the wider industry to find a solution that delivers the best outcomes for customers.

At Klarna we are committed to being 100% transparent and ensuring that our customers are always protected in each step of their shopping experience. We are proud of what we do and we are constantly working to make things better for our customers. We built Klarna to reflect how people live today and it’s now clear that BNPL will play a key role in the future of consumer finance and retail banking. We believe that this is a huge opportunity to fix what is broken and establish a better industry that puts consumers’ best interests first.


Copyright © 2005-2023 Klarna Bank AB (publ). Klarna Bank AB (publ) is authorised and regulated by the Swedish Financial Supervisory Authority. Deemed authorised by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website. Klarna Bank AB offers both regulated and unregulated products. Klarna’s Pay in 3 instalments and Pay in 30 days agreements are not regulated by the FCA. Klarna Bank AB (publ) registered and head office: Sveavägen 46, 111 34 Stockholm, Sweden. A Swedish public limited company (publikt bankaktiebolag) registered with the Swedish Companies Registration Office with organisation number: 556737-0431.