As the holiday season approaches, the reliance on Buy Now, Pay Later (BNPL) schemes among UK adults is more evident than ever. Almost half (48%) of UK adults have used BNPL to manage their finances, especially for spreading the cost of purchases. This trend isn’t showing any signs of slowing down as the festive period looms. In fact, Equifax UK’s BNPL Barometer reveals a significant rise in BNPL usage – with 7.4 million more people opting for this payment method in 2023 compared to the previous year.
A Spike in Monthly BNPL Payments
Equifax’s data indicates a substantial increase in average monthly BNPL payments – a jump of 46% in the past two years. From an average of £105 in 2021, payments have escalated to £153 in 2023. December, in particular, sees the highest spike in payments, reaching £172 last year. This upward trend is expected to continue, suggesting another increase in BNPL payments this festive season.
BNPL: A Necessity for Christmas Shoppers
With the festive shopping frenzy on the horizon, nearly one-third (32%) of consumers plan to use BNPL for their Christmas, Black Friday, or Cyber Monday shopping. Alarmingly, about 30% of these shoppers admit that they would struggle to afford Christmas without BNPL’s help. This figure has risen from 27% in 2021. Young adults, aged 18 to 34, are more likely to use BNPL for festive shopping, while those between 35 to 55 years are increasingly relying on it for their Christmas expenses.
Diverse Sectors and Failed Payments
BNPL isn’t uniformly used across all sectors. The highest usage is seen in fashion, interiors, white goods, electronics, and worryingly, everyday consumables. However, with increased usage comes increased risk. About 17% of consumers report missing a repayment, and this number rises to 46% among 18 to 34-year-olds. More than half of BNPL users tend to spend more when utilizing this service.
Increase in Transaction Frequency
Not only are monthly payments rising, but the frequency of transactions is also on the up. The average number of BNPL payments has risen from about four and a half in 2021 to over seven in recent months.
Regulation and Consumer Awareness
Despite popular belief, BNPL is not regulated by the Financial Conduct Authority (FCA) in the UK. This lack of regulation is a growing concern, especially with the increasing reliance on BNPL among various age groups. The largest user base remains the 18 to 34-year-olds, with over half using BNPL in the last year. Interestingly, there’s a significant uptake among those over 55, with 13% using BNPL in 2023, up from 4% in 2021.
Expert Insights and Advice
Craig Tebbutt from Equifax UK highlights the surge in BNPL use in recent years, describing it as an “essential part” of many people’s shopping experience. He advises consumers to treat BNPL like any other form of credit, emphasizing the importance of being able to afford repayments and understanding the risks involved. Tebbutt also supports the call for BNPL regulation, which would protect consumers and help those with limited credit histories to build a healthy credit score.