In the UK, against the background of the cost of living crisis, the use of the Buy Now, Pay Later (BNPL) service has sharply increased.
Last Tuesday, October 31, the Financial Conduct Authority (FCA) published the results of a study according to which the frequency of consumer’s using an installment payment plan increased by 10% compared to a year ago. This organization stated that it provided new protection for citizens, as Britons belonging to the group of financially unprotected persons are increasingly turning to BNPL to overcome economic difficulties. The Agency also claims that the relevant efforts in its case are ongoing.
Sheldon Mills, the FCA’s executive director of consumer and competition affairs, said the study shows a significant increase in the application of BNPL over the past year. According to him, the correct use of this product offered in the financial services market provides valuable advantages. At the same time, he noted that the agency strives to ensure that consumers have a guarantee of proper protection and receive sufficient amounts of information. This question is especially relevant for those who find themselves in a vulnerable position.
FCA data shows that 27% of adults in the United Kingdom used BNPL at least once in the six months leading up to January of this year. In a survey of citizens in May last year, this figure was 17%. This dynamic confirms the growing popularity of BNPL among Britons who are trying to overcome the consequences of the cost of living crisis.
The FCA does not have the authority to regulate the sector of the mentioned financial services, but the agency reported that it has applied its capabilities under the Consumer Rights Act 2015 to amend potentially unfair and unclear contract terms. These actions have spread to QVC and PayPal. The mentioned companies voluntarily agreed to simplify the understanding of the terms of their authority for continuous payments. PayPal has made clearer and fairer the algorithms that apply in cases where a consumer cancels a loan-funded purchase.
BNPL has become something of a necessity for some residents of the United Kingdom. At the same time, the media reports that the lack of this financial service has become a kind of obstacle for young buyers when concluding transactions. According to the results of a special study, it was found that consumers of this age group, especially representatives of Generation Z and millennials who are burdened with credit card debts and high-interest rates, most often use BNPL as the preferred payment method. If there is no access to the mentioned financial service, 28% of millennials and Generation Z will refuse purchases.
Profound changes in consumer behavior, according to experts, are transforming the landscape of retail payments. These changes make BNPL mandatory.
At the same time, statistics show that in the process of making large purchases, the frequency of using credit card payments is higher compared to the intensity of applying BNPL. This is because, within the framework of these payments, consumers get access to a wider set of functions.
The results of an industry study indicate that there is currently a request to expand opportunities within the BNPL. Consumers hope that over time when performing actions in the format of the mentioned financial service, the same functions that are characteristic of credit card installments will be offered. According to the results of the study, it was found that 38% of respondents will improve their attitude to BNPL when the providers of relevant solutions implement a reward system.
In the UK, the problem of companies’ insolvency has also worsened. The Insolvency Service cases reported that according to the results of the third quarter of this year, 6208 firms were in the corresponding position. During the same period last year, the number of companies that declared insolvency amounted to 5,635.
There are also currently 37,722 businesses in the UK that are in a critical financial situation. This indicator grew by 25% year-on-year. There are also currently 480,000 businesses in the United Kingdom that are in significant financial difficulty.
As we have reported earlier, Citi Launches BNPL Option for Costco Anywhere Visa Cardmembers.