Context
Buy now pay later (BNPL) products are a form of short-term loan that are offered at the point of purchase, with either little or no fee or interest. This is usually done by way of either credit which is repaid over a period of time, or invoicing payment where consumers make repayments in instalments. There has been a rapid increase globally in the use of BNPL products. In the UK, it’s estimated that 10.1 million people have used BNPL in the past 12 months. While there is already good practice in the BNPL provider market, with BNPL products continuing to grow in popularity, it is possible that consumers may struggle to manage multiple payments, particularly those who are already in debt.
The study
The study comprised a rapid evidence review and a survey.
Review: A review of the academic and policy literature on the use of BNPL products and explored evidence from UK and worldwide on BNPL. The rapid evidence review aimed to:
- Provide a better understanding of the scale and nature of the BNPL market in the UK, types of products and channels, their usage, key risk factors and current trends; and more widely, the impact of BPNL on users’ financial wellbeing and the wider UK economy.
- Identify good practice and potential solutions that MaPS could either implement or discuss with third parties to support BNPL users to better manage their debts
Survey: an online survey of a representative sample of 2,507 UK adults who have used a BNPL product in the last 12 months using the Behavioural Insights Team (BIT)’s experimental platform, Predictiv. The survey also used age, gender and postcode to split participants into MaPS’ three financial resilience segmentation groups: cushioned, squeezed, struggling.
MaPS commissioned BIT as part of the UK Strategy for Financial Wellbeing to explore how consumers use and manage their credit (in particular BNPL related products) and how to better support consumers.
Key findings
Findings include the following:
- BNPL is a rapidly growing in users, merchants, and providers and market penetration is expected to double by 2024.
- Majority of BNPL users are under 40, but demand is increasing across all user groups.
- Awareness, accessibility, and affordability are three key drivers for the increase in BNPL adoption.
- People are increasingly likely to use BNPL for day-to-day essentials. 1 in 2 said that the recent rise in prices has changed how they use BNPL.
- The ‘Struggling’ and ‘Squeezed’ segments are more likely to struggle to manage their BNPL payments. We found that good practices for managing BNPL were most common, although negative practices were notable.
- Lack of understanding of BNPL products and limited transparency in individuals’ credit profiles could pose a risk to individuals’ financial well-being and the wider economy
- Regulations and behavioural nudges have shown to be promising in encouraging better credit management
- Of the interventions tested in the survey, people were most supportive of repayment reminders, which are already offered by some BNPL providers.
Points to consider
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Methodological strengths/weaknesses: There are no details given about the rapid evidence review other than to confirm its objectives. There are also no details given about how the sample of BNPL users was considered to be representative although a breakdown by demographics is included. The study does note that the sample doesn’t capture the digitally excluded, or people not inclined to complete online surveys. It also notes that just because people say they would do something in an online experiment, this doesn’t mean they always will in real life, and cautions that it is necessary to interpret stated intent as a likely upper bound of real behaviour.
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Applicability: Of interest to providers of BNPL products, other financial institutions, government, policy makers, regulators, support agencies and anyone working with people on lower income or in debt.
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Relevance: Highly relevant given the growth of BNPL products and the likely impact on people who are already struggling.
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Generalisability: Specific to the UK but as these products are growing globally, there will be much that applies in other markets
