At the age of 74, Vivienne doesn’t seem like your typical Klarna customer.

A retiree keen on horse racing, with two adult children and four rescue animals, she “likes the nicer things in life” – and she uses buy now, pay later (BNPL) finance to pay for them.

The former British Airways steward is a regular user of the platform and is part of a surge of older customers turning to BNPL finance.

Demand for BNPL has surged in the UK, particularly during the cost of living crisis, but it’s no longer just being driven by millennials born in the 1980s and early 1990s.

Instead, new research has found the fastest-growing group of users of deferred payment schemes are the older generations and those with higher incomes.

In the UK, more than a third (35.5%) of people have said they have used BNPL in the last 12 months, according to money experts Finder, who surveyed 2,000 people across Great Britain at the end of January 2023.

And with the cost of living crisis continuing to grip the UK, more than two-fifths (42%) of BNPL users said this was the first time they had done so.

‘The little luxuries’

Once a niche form of credit, BNPL use has exploded in the UK, after first rising to popularity following Klarna’s partnership with retailers – including online fashion giant ASOS – in 2015.

Founded in the early 2000s with an intention of being the Swedish PayPal, Klarna found international recognition with its BNPL feature.

First pitched as a “try before you buy”, it meant cash-strapped millennials could make online purchases, and then return anything that didn’t fit or wasn’t right, without spending any money.

BNPL is now a crowded sector with various brands, like Zilch and Laybuy, vying for customers’ credit with Klarna.

And amid growing financial pressures and soaring inflation, more customers are welcoming the ability to break payments up into smaller, more manageable, chunks.

But with BNPL now available on everything from white goods to takeaway pizza (it was added to Deliveroo in 2022) – it is older and wealthier customers who are turning to it.

While those in their 20s and 30s still top the chart of those using it, according to Finder, the fastest-growing age group turning to BNPL is those over 55.

Almost a fifth (18%) of those aged 55+ have used BNPL and half of them started using it within the last 12 months.

At Klarna, the fastest-growing age group is now over 58 years old. Previously, it was 40 to 57.

“You should be pretty savvy about how much money you save, at our age,” said Vivienne.

“I use it to buy the luxuries I would otherwise wait for the sale for, or end up raiding my savings.”

Among those luxuries, Vivienne used it to buy a £700 “super-glam” outfit for Royal Ascot.

“I didn’t have that money, but I could afford it over time,” she said.

The common ground between ‘millennials’ and ‘boomers’

Millennials and Gen Z remain the most likely to have used BNPL overall, but those aged 45 to 54 are the second most likely to have used BNPL for the first time over the past 12 months.

While BNPL’s recent popularity with baby boomers might seem surprising, the two generations have more in common than it might seem.

Generation rent and their mortgage-free elders both face the issue of their housing not always counting towards their credit score.

Peter Cartwright, 60, said while he is “lucky” enough to have paid off his house, he now doesn’t have any real lines of credit.

“I use it to keep my credit rating good,” he said.

“In the future, if I want to apply for a loan for something for the house, or decide to apply to help my children buy a house, without a credit rating I am going to get turned down.”

Not all BNPL firms report to credit agencies, or CRAs – also known as credit bureaux – but more than half do and the rest are expected to follow suit.

This means using BNPL companies (including DivideBuy, Payl8er and Zilch) can affect your credit score.

This can be both positive – for consumers struggling to build up their score via more traditional means – or can also pose a risk of ruining your score if you fall behind with payments.

From fast-fashion to big-ticket items

But campaigners from the Centre for Financial Capability have expressed concern about the growing demand among older people. Their data also found almost 20% of over 65s have used it in the last year – compared to just 10% last year.

“BNPL has largely been seen as a way for young people to fund their fast-fashion habit, but our research shows the payment method is now more likely to be used by older people and often for big-ticket items like laptops and phones,” OpenMoney managing director, Hayley Millhouse, said.

But she said it was “worrying” to see two-fifths of users struggle to pay off the resulting debt, with many turning to family and friends to make repayments.

Does BNPL encourage excess spending?

With more than a third (35.5%) of the UK already having used BNPL, a further 13% said they plan to use it in the future, according to Finder.

If this were to come to fruition, based on Finder’s survey, it would mean almost half of the population (48%) will have used BNPL.

But there has been concern that the ease of BNPL could encourage people to spend more than they can afford.

“Using it does probably mean I spend more and can buy more things than I used to – but at least I can afford them,” said Vivienne.

Richard Lane, from debt charity StepChange, said sales packs that go out to retailers in a bid to persuade them to use BNPL on their websites “talk really explicitly about how they’re going to get consumers to spend more money by embedding buy now, pay later”.

“And that’s often done by ensuring there is considerably less friction to check out with BNPL than it would be to use your debit card,” he said.

“When you can take something out so quickly, do you have that moment of pause? We’ve done polling that suggests that lots of people who take out buy now pay later don’t even recognise they’ve taken out credit, they don’t think of it as credit or debt.”

‘There isn’t the stigma’ for older customers

Alex Marsh, head of Klarna UK, told Sky News responsible lending was key.

He said: “There are various scenarios where credit legitimately makes sense, whether it’s BNPL or a credit card.

“The fundamental for me is that it is offered responsibly so the consumer ultimately can afford that credit and it supports what they are trying to achieve.”

The average Klarna balance is around £70, he said, with loans “typically short-term in nature”.

He says BNPL does not have the same structure as traditional credit – you use it to purchase a particular item which you then pay off, rather than adding to an “overarching” balance on a credit card.

It also underwrites each purchase as a new loan, so each time a person adds to their balance it looks at their credit score and how they used Klarna in the past.

Currently, you don’t have late fees if you miss a payment with Klarna – something that is changing on 16 March, when the company introduces fees of up to £10 if you don’t pay.

Other BNPL platforms, such as Clearpay of Laybuy, already have late fees.

When it comes to who is using Klarna, he said it’s “not surprising” the older and wealthier are turning to the platforms.

“Interest-free credit is something they are used to, and have always had access to,” he said.

“There isn’t that same barrier or stigma for them.”

Chris Edwards, 44, from southeast London, used BNPL schemes – such as PayPal Credit – to furnish his flat after moving.

“You spend all your money on buying a house and then you don’t have any left to put anything in it,” he said.

“It’s incredibly useful.”

He has also used BNPL to finance a holiday, despite having the money to pay for it all upfront.

“What that enables me to do is take the lump sum that I have and put that into a short-term savings account so it earns some interest,” he said.

“The money is working for me while I am still paying off the debt.”

The road to regulation

Draft laws that would bring BNPL services into regulation and give borrowers crucial rights and protections have now been published by the government, but the new rules won’t come into effect for several months.

The plans could protect up to “10 million consumers”.

The regulation, published on 14 February, comes almost two years after the government said it would regulate the industry.

The eight-week consultation will look at how firms would need to comply with rules from the Financial Conduct Authority (FCA), including how they would need to spell out key information about loans to customers. Lenders will also be required to carry out checks to ensure loans are affordable to customers.

Richard Lane from StepChange added: “We’re not saying buy now, pay later is fundamentally a terrible thing. It’s not and we all use credit for our outliers – whether it’s to get a mortgage or make a big expenditure.

“Buy now, pay later is not a problem in itself, like lots of credit.

“Our concerns are that is not regulated in the same way as other credit.”

Despite not yet being regulated by the FCA, the organisation has already secured changes to unfair contract terms and issued warnings to BNPL firms over misleading advertising.

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Once the proposed scope and framework of the legislation are decided, the FCA will then consult on the rules firms will need to follow.

An FCA spokesperson said it welcomed the launch of the government’s consultation: “As these products develop and become more widespread, they can have benefits for consumers, but there are also risks and the potential for harm.”