Buy Now Pay Later (BNPL) has taken off in the UK market. Consumer expectations have shifted away from traditional lending and payment products toward low-cost or free services with convenient, intelligent digital experiences. The concept of BNPL has evolved into an embedded digital payment and lending product in high demand and well-liked by both consumers and merchants.
In Bain & Company’s new survey of more than 2,000 UK online shoppers, we found widespread usage of BNPL services reflecting long-term shifts in consumer behavior. From our customer survey analysis and data from BNPL companies, we estimate that approximately 10.1 million people used BNPL in the UK in 2020, with the number of users growing by 70-80% from the prior year.
The five takeaways from the UK include:
• There is a high demand for BNPL services which is spurring sustained growth as BNPL appeals to the mass consumer market
• BNPL has a favorable consumer perception due to the simplicity of payment at checkout and the ability for users to manage their cash flow better
• BNPL is a key ingredient of merchants’ growth plan as consumers like the convenience
• The digital upheaval in financial services continues as consumer expectations shift from traditional lending and products towards low-cost or free services with convenient, intelligent digital experiences
• Merchants should keep ahead of imminent regulation and the need for industry-wide debt data to ensure adequate consumer protection as usage grows
Roughly 20,000 merchants in the UK are now offering BNPL at checkout and the industry is set to face stricter regulation by the UK Financial Conduct Authority. Our analysis shows that the current credit referencing systems and processes are not designed for higher frequency, low-value credit checks and reporting for each transaction. Fears around the inadequate ability to share credit data between BNPL companies and other lenders will also need to be addressed.
“The success of the BNPL industry has been their ability to appeal to a mass-market audience across income and age groups,” said Ryan Garner, associate partner at Bain & Company and co-author of the report. “This is due to their marketing as well as their growing presence within e-commerce alongside popular retailers. We expect BNPL to become much more of an influencer of customer purchasing decisions as the industry looks for new growth opportunities beyond payments.”
Sourced from Bain - written by Aliza Medina