Frictionless credit is great for retailers and for the majority of consumers who are able to split the cost. PayPal’s announcement of their new ‘buy now, pay later’ (BNPL) proposition ahead of the Black Friday and Christmas shopping season highlights the popularity of rising interest in free credit companies in the market.

An increasing number of brands have linked with these BNPL payment firms, from retail to electronics to homeware, all offering this service to give their customers flexibility, whilst providing benefits for themselves. According to one BNPL brand Klarna, “retailers typically see a 68% increase in average order value with Klarna Installments.” The brand incurs little risk by getting paid upfront and in full, while the customer gets the option to pay later or over time; “enhancing the full customer shopping journey” according to Klarna.

The concept is particularly popular with millennials, with companies branding themselves a “simpler and smarter” alternative for a credit card. However, given the latest version of our QT found that 29% of Brits are less comfortable on their income than this time last year, with 35% of those aged 25-34 feeling less comfortable (vs. 29% of Brits), there needs to be acknowledgement for the risk of this format for some consumers.

Concerns have been raised to whether BNPL is resulting in an increased number of young customers being in debt. One price comparison website found that the average debt owed to BNPL firms has hit £176, with 1 in 5 shoppers claiming to use this service. Step Change, the UK’s leading debt charity, claims: “Along with convenience there’s a more worrying aspect [of BNPL]: by encouraging you to defer the reality of paying precisely at the moment you are focused on the goods you wish to buy, there’s a risk that when the time to pay does come, it might not be affordable.”

There’s little doubt that these fintech firms have taken the market by storm and are continuing to do so, altering purchasing norms. They facilitate a frictionless shopping experience, that in a hugely competitive landscape can make the difference between a brand securing a customer’s business or losing them to the competition.

Nonetheless, perhaps more emphasis needs to be placed on the latter action of ‘buy now, pay later,’ so that consumers are actively being encouraged by brands and BNPL sites to think ahead when making these purchases and being made more aware of the risks; particularly important now in the uncertain economic landscape we’re facing with Covid-19.