Saturday Spotlight: Cost of living crisis is giving Buy Now Pay Later shot in the arm
Buy Now Pay Later offerings may be controversial and much-criticised, it seems the cost of living crisis is giving the format a major boost.
In fact, it has emerged that nearly half of all Brits are more likely to or are already using Buy Now Pay Later (BNPL) services compared to a year ago, according to new research shared exclusively with City PM this morning.
A quarter of consumers are more conscious of their spending habits during the cost of living crisis, are more likely to use BNPL for festive purchases this year, whilst 27 per cent of shoppers are already using the payment option, payment service provider Ecommpay told this paper.
High-value gifts
On average, Brits expect to spend £293 in total for gifts this Christmas.
Over a quarter of consumers are more likely to buy a high-value gift, such as jewellery, if BNPL is offered as a payment option this festive season.
In fact, shoppers who plan to use BNPL for holiday shopping are most likely to for larger purchases – on average £325.
As retailers and e-commerce businesses navigate another tricky golden quarter, a third of shoppers are likely to remove items at checkout if a BNPL option is not offered when making purchases online
Similarly, 31 per cent of consumer are likely to look for another shop if their chosen store does not offer BNPL.
With the cost of living crisis mounting, the top three items shoppers would use BNPL for during the festive season are: electronics (15 per cent), clothes & shoes (14 per cent), and toys (12 per cent).
The data also shows that while there has been a gender gap with women more likely to use BNPL, this is levelling out as men become more interested in the payment option this festive season.
This trend will continue in 2023, as on average, UK consumers plan to use BNPL for 16 per cent of purchases.
For men this rises to 19 per cent of purchases, while for women it drops slightly to 14 per cent. Younger age groups remain the demographic with the biggest uptake of BNPL services, with 16-34-year-olds most likely to use BNPL in 2023, for 30 per cent of purchases.
Fast-growing industry
As the BNPL industry grew quickly and at the beginning of the year, 51 per cent of consumers felt providers needed to be regulated.
To better protect consumers, regulations have since come into effect and 37 per cent of consumers say they are now more encouraged to use BNPL services.
Regulations and financial literacy support remain important elements of responsible BNPL use, as the data shows almost three in five consumers (58 per cent) feel that BNPL encourages them to spend more than they can afford, up from 54 per cent at the beginning of 2022.
“Consumers are expected to be more cautious with festive spending this year as the cost-of-living crisis impacts us all,” stressed Paul Marcantonio, executive director UK & Western Europe at Ecommpay.
“Consumers prefer choice when it comes to making payments, and businesses must take note or risk losing out on key sales this golden quarter.”
Paul Marcantonio
“New payment options will be useful for both businesses and consumers, as we navigate the year ahead,” he added.
As part of this, shoppers are exploring alternative payment methods, such as Buy Now Pay Later (BNPL), Marcantonio explained.
“While it’s encouraging to see more awareness among consumers of the financial solutions available, BNPL comes with the inherent risk that shoppers can run up debt which may put them into difficulty later,” he concluded.