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Buy now and pay later schemes gain traction among thrifty Germans By Reuters

Buy now and pay later schemes gain traction among thrifty Germans

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© Reuters. FILE PHOTO: People walk next to a Doner kebab and Currywurst booth at Kurfuerstendamm shopping street during Christmas season in Berlin, Germany, December 18, 2023. REUTERS/Lisi Niesner/File Photo

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By Maria Martinez

BERLIN (Reuters) – Kira Siewert did not have much cash to spare as an 18-year-old doing an apprenticeship three years ago, but when she wanted to treat herself to new clothes she became one of a growing number of Germans turning to short-term online credit schemes.

Siewert bought trousers and tops via Klarna, an app that gave her the option of paying after 30 days or paying in three interest-free monthly instalments. She made a first order of 120 euros ($129), but only had to pay for the items she kept.

Such a purchase is part of a new trend that seems alien to her parents’ generation, in a country that has traditionally prided itself on thrift.

“They have a completely different view of the topic than I do,” Siewert said. “They would only buy what they can pay for directly, as they probably also want to avoid the risk of possible debt.”

“I think that in our generation, this topic of credit is no longer so secretive,” she added.

Many Germans, particularly younger ones, are taking loans of less than 1,000 euros via app-based and other credit offerings as inflation makes it harder to make ends meet but high job security makes them feel confident about repaying the money.

“It is a long term trend, which will mean that over the long run, German consumers become a bit more normal, like other Europeans,” Holger Schmieding, chief economist at Berenberg, told Reuters.

While they only make up a fraction of overall credit, such quick loan schemes could offer a consumption boost to Europe’s largest economy, as its export-based model is being challenged by weakness in global demand.

“We assume that the savings rate will fall and that Germans will start to increase their consumption,” said Charles Seville, senior director in Fitch Ratings’ economics team. “That would be the main driver of a very shallow recovery in 2024.”

Germany has the highest saving rate for households in Europe, with households on average setting aside close to 20% of their income, well above the 12.7% European Union average, Eurostat data for 2022 showed. Credit cards are not popular in Germany, where only 29% of citizens used them in the last 12 months, compared to 60% in France.

But in 2022, which had an average inflation rate of 7.9%,…

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