CareCredit - Women's Health April 2024

Report: 25% of UK BNPL Users Hit With Late Fees

Nearly a quarter of British buy now, pay later (BNPL) users have been charged late fees.

These fees for late repayments hit younger consumers the hardest, the Financial Times (FT) reported Tuesday (Jan. 2), citing data from the nonprofit Centre for Financial Capability (CFC), showing that 22% of BNPL users had missed one or more repayments in the six months leading to December 2023.

More than a quarter of those users saw their credit scores decline, or were contacted by debt collectors, the survey found. The research found that 34% of consumers between the ages of 18 and 24 were charged late fees, more than any other age group.

“As the ongoing cost of living crisis continues to impact the British public, it is apparent that many users are increasingly reliant on these schemes, without fully understanding the risks involved,” said CFC trustee Jane Goodland.

“Our polling shows the high usage of BNPL particularly [among] young people, many of whom are facing difficult financial consequences as a result of these schemes.”

The news comes at the start of a year that will likely see a surge in BNPL use, as Jacqueline White, president of i2c, told PYMNTS CEO Karen Webster in a recent interview, arguing that it will become a payment option consumers expect to see from every merchant.

“It’s never been more important for people to be able to hang onto their cash, as more consumers are looking to use BNPL to pay for the necessities of life … all the way around to fun things like travel and entertainment,” she said.

At the same time, White noted that as more providers offer BNPL, risk analysis is crucial, with companies like hers helping its partners examine the risk profiles of users as actual credit is extended at the point of sale.

Meanwhile, PYMNTS Intelligence has found that younger consumers are more likely than older ones to use BNPL when they need to deploy credit, with 14% of Gen Z consumers and 20% of millennials saying they used BNPL in the 90 days before they were surveyed.

“[The younger generations] are cautious about accumulating high-interest debt,” White said in a separate PYMNTS interview. 

“They’re drawn to buy now, pay later because it lets them think through, ‘I’m going to spend this amount of money, I’m going to pay it over these four payments or these six payments,’ and it allows them to fold it into their budget as opposed to this idea of accumulating debt.”