FCA Research Shows 27% Of Brits Used BNPL In A Six-Month Period
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The number of people using Buy Now Pay Later (BNPL) options to buy items has significantly increased, according to the Financial Conduct Authority (FCA). The regulator noted that those using this service were likely facing financial difficulty.
The FCA analysis noted that 14 million people, around 27% of UK adults, used the BNPL service to purchase items within the six months leading to January 2023. This number significantly increased from the 17% of UK adults who used the service in the 12 months preceding May 2022.
BNPL Service Gains Popularity Among UK Population
The BNPL service allows people to purchase items on credit and pay back later in interest-free installments. The service is made available by financial firms such as Klarna and PayPal.
The FCA research noted that the frequent users of this BNPL service were likely facing financial difficulty. The users who accessed the service over 10 times within the last 12 months were more than twice as likely to access a high-cost credit product compared to those who have not previously used it.
The BNPL users were also missing some of their payments. 27% of users had missed a bill payment or credit commitment within three of the last six months. The figure is significantly higher than the 6% of people who had not adopted the service but missed a payment.
FCA Advocates For Consumer Protection
The UK regulator does not have any regulatory authority over the BNPL service. However, the regulator said it was advocating for more consumer protection from “potentially unfair and unclear contract terms.”
The FCA has reached out to BNPL service providers and issued guidance after expressing concern that PayPal and other payment services were at risk of harm because of how some of the contract terms were written. The financial firms eased the language used in the contract.
The BNPL Service is now looking like an ideal option for budget management, and it is already working for millions of people, as seen in the statistics released by the FCA. However, the service also faces challenges as some people have exploited it to purchase items they do not need or cannot afford.
The FCA is interested in this service because of its increased use. The FCA has recommended a review of unsecured customer credit markets, which will see BNPL products brought under its regulatory purview.
