Klarna research: Brits ditch ‘high cost credit cards’ for Christmas
One in every two UK consumers is planning to ditch their credit card entirely for Christmas shopping this year, with two-thirds of credit card owners wanting to avoid paying interest, according to research from Klarna.
The buy now, pay later (BNPL) specialist surveyed more than 11,000 people across the US, UK, Australia, Germany, Austria, France, Belgium, the Netherlands, Sweden, Norway and Finland, including 1,092 in the UK.
Despite the promise of interest free periods, 46% of Brits that used their credit cards ended up paying interest on their Christmas shopping last year.
Somewhat unsurprisingly, the research also found that BNPL consumers are much better at planning and budgeting for their Black Friday and holiday shopping.
Six in ten have set an overall budget for their holiday shopping, compared with just 42% of those who had never heard of BNPL. And half wait for Black Friday sales to make larger purchases compared to less than a quarter of people who never heard of BNPL.
Klarna also cites a recent report by Bain, which found that BNPL saved UK consumers £103 million in interest and fees in 2020 by ditching their credit cards.
The average outstanding BNPL balance is £200 compared with over £500 for credit cards. According to Bain, BNPL accounted for 5% of total e-commerce, or £6.4 billion-worth of purchases, in 2020.
Alex Marsh, Head of Klarna UK, comments: “This data shows that shoppers are increasingly smart and mindful about their buying decisions.”
“It’s no wonder they are abandoning high cost credit cards that are designed to obscure spending to drive up debt and interest payments. Helping shoppers plan in advance and budget smartly is baked into buy now, pay later, giving people better control over their finances to save money and keep them out of debt.”
Trouble ahead?
There has been increasing political and regulatory scrutiny of buy now, pay later companies in recent times, based around concerns that they tempt consumers to purchase goods they cannot afford.
As a result, Klarna has been on something of a charm offensive, whilst also taking aim at traditional banks and credit card companies.
Earlier this year, for instance, it launched a UK campaign titled #WhyPayInterest.
Running across OOH, online, on social media and in print, this aimed to highlight the difference between BNPL products and traditional credit cards, challenging what Klarna called “outdated business models and products that don’t serve consumers’ best interests”.
