BNPL usage drops in UK

Four in ten (38%) consumers now indicate they have made use of BNPL, down from almost half (48%) when asked last year2. Just under three in ten (29%) use BNPL services at least once a year, rising to 54% among 18-24-year-olds, while 11% use it more than once a month. Meanwhile, Equifax analysis shows the average transaction3 amount has increased by almost a third - or nearly £100 - in the past year alone, from £269 in 20232 to £357 this year1.

As the Christmas shopping season gets underway, 58% of BNPL users - or nearly 12 million Brits4 - also plan to use it to help fund their Christmas shopping, including during promotional shopping events Black Friday (29 November) and Cyber Monday (02 December).

Spreading payments without incurring interest (27%) was the most common reason. However, 13% said they would struggle to afford gifts without the help of BNPL, 12% feel pressure to buy presents for family and friends so use BNPL to cover the cost, and 18% feel more comfortable using BNPL than a credit card.

Meanwhile, the cost-of-living crisis is driving consumers to use BNPL services more across a number of areas, compared with November 20232. This includes everyday consumables like food, drink and toiletries (17%, up from 11% in 2023) and eating out or takeaways (13%, up from 9% in 2023), in signs of increasing consumer reliance. Plans to use BNPL more were also high across white goods (27%), electronics (26%) and fashion (23%).

Craig Tebbutt, Chief Strategy & Innovation Officer at Equifax UK, said: “With BNPL usage still high and typical spend levels increasing, it is essential consumers experience the same protections and benefits they receive from other credit products, including the positive impact on their credit files when they make repayments on time. With Christmas shopping season already upon us, BNPL’s simple application process and zero-interest terms make it an appealing choice for many to help spread costs, but it’s also easy to overstretch and important shoppers still treat BNPL just like any other form of credit by only borrowing what they can afford to pay back within the payment terms provided.”

What could future regulation mean for consumers?

The UK government is currently consulting on draft legislation to bring BNPL products under regulation, which is set to close on 29 November 2024. With BNPL products set to eventually come under Financial Conduct Authority (FCA) regulation, it is expected that consumers will gain crucial protections, including safeguards that require BNPL lenders to meet FCA standards for responsible lending. It is also expected that consumers will also have the option to turn to the Financial Ombudsman Service for complaints regarding BNPL providers.

However, these changes alone do not guarantee the benefits of including BNPL credit in consumers’ credit files. Without consistent reporting by BNPL firms to all major credit reference agencies, consumers miss out on the potential benefits of on-time repayment records, which could contribute positively to their credit history. Meanwhile, consumers in financial difficulty also may not receive adequate protections, as lenders are currently unable to see the full scope of outstanding BNPL payments when evaluating affordability.

Craig Tebbutt added: “Change is on the horizon, with the UK government’s consultation on BNPL regulation set to close on none other than Black Friday. This is a step in the right direction but regulation may not yet take effect for some time, and consumers will only start to fully benefit once BNPL providers consistently report data to credit reference agencies, just like other lenders. Providers are trying to assess customer affordability responsibly, but this is challenging as long as some BNPL data remains absent from credit files. Providers don’t need to wait around for more regulation and can start reporting this right away to help boost inclusion and protect consumers from a tough January.”