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UK BNPL Use Jumps 10% Amid Cost-of-Living Crisis

buy now pay later on smartphone

England’s cost-of-living crisis has fueled a surge in buy now, pay later (BNPL) use.

New research by the country’s Financial Conduct Authority (FCA) shows a 10% increase in use of the installment payment plan, the watchdog announced Tuesday (Oct. 31).

With that in mind, the FCA says it has secured new protection for consumers, as financially insecure Britons turn to BNPL to make ends meet. The agency says this is part of its ongoing effort to safeguard users in this sector.

“Our research shows a significant increase in the use of BNPL over the past year,” Sheldon Mills, the FCA’s executive director of consumers and competition, said in a news release.

“When used appropriately, the product provides valuable benefits, but we want to ensure that consumers, particularly those in vulnerable circumstances, have adequate protections and are given sufficient information.”

According to the FCA, 27% of British adults used BNPL at least once in the six months leading to January of this year, compared to the 17% who said they used it when surveyed in May 2022.

Although the FCA does not regulate the BNPL sector, it says it used its powers under the Consumer Rights Act 2015 to make changes to potentially unfair and unclear contract terms in the industry.

It also worked with QVC and PayPal, with those companies voluntarily agreeing to make their continuous payment authority terms easier to understand.

PayPal, meanwhile, “has made terms relating to what happens when a consumer cancels the purchase funded by the loan clearer and fairer,” the release said.

While BNPL has become a necessity for some British consumers, research by PYMNTS Intelligence finds that it’s also a deal-breaker for younger shoppers.

That study showed that these consumers, particularly millennials and Generation Z, who are burdened by credit card debt and high interest rates, are leading the charge in using BNPL as their preferred method of payment.

“In fact, 28% of millennial and Generation Z consumers would abandon a purchase if BNPL were not available at the checkout,” PYMNTS wrote. “This shift in consumer behavior is reshaping the retail payments landscape, with BNPL becoming a must-have for shoppers.”

Meanwhile, a recent PYMNTS Intelligence and AWS study found that credit card installments are currently used more frequently and for bigger purchases compared to BNPL because they provide consumers with features that BNPL lacks.

The study found that “consumers expect BNPL to offer the same features as credit card installment plans, with most BNPL users (38%) citing rewards as the top feature that would improve their satisfaction with BNPL lenders,” PYMNTS wrote.