Klarna, the AI-powered global payments network and shopping assistant, has announced new data showing that,  is celebrating its tenth year in the UK this week. Ten years ago, Klarna created the UK’s modern BNPL industry: short-term, interest-free installment credit. In a decade marked by rising credit card debt, Klarna's BNPL solution has helped consumers avoid nearly half a billion pounds in interest payments.

This could have been a lot more, with credit card companies raking in an eye-popping £160bn in interest payments over the past decade.  

British consumers have reduced their dependence on consumer credit over the past ten years. Consumer debt is now 12% of disposable income, its lowest level since 2000; this is mostly attributable to wider factors, in particular the lockdowns. 

However, the growing use of BNPL is helping consumers ditch higher-risk forms of credit such as credit cards. A study by research consultancy Capital Economics found that 1 in every 2 BNPL customers had reduced their credit card usage after discovering BNPL. 

In the 10 years since Klarna entered the UK market, consumer credit has grown two times faster than credit card balances, suggesting a strong and steady shift away from credit cards. 

In the year to May 2024, Brits spent £6.3bn using BNPL, up by 55% from £4.1bn in 2020. If this was spent on credit cards instead, Brits would have spent an extra £118m in interest charges. 

As well as avoiding interest charges, BNPL customers have lower outstanding balances, which they clear more quickly, than credit card users. The average outstanding BNPL balance was £150 compared with £1,295 for credit cards.