Buy Now Pay Later (BNPL) Services

Buy now pay later (BNPL) services have become a popular way of obtaining credit in recent years. BNPL services allow consumers to make purchases and pay for them in instalments over time, often interest-free or with a small fee. BNPL can offer convenience and flexibility, but it also poses potential risks, especially regarding debt accumulation.

According to Citizens Advice, more than one in four UK adults (28% - the equivalent of 15.1 million people) say they’re likely to use Buy Now Pay Later to help with festive spending. As of 2023, more than one third (36%) of people in the UK have used BNPL services at some point, which equates to more than 19 million people and is most popular among UK millennials, with more than half (55%) using the payment method as of 2023. An additional 13% of the UK population intends to use BNPL services in the future. Moreover, Adobe revealed that £3.3 billion was spent using BNPL schemes in November and December 2023, a year-on-year jump of 12.7%. The global forecast for BNPL is estimated to grow by a staggering £34.8 billion between 2022 & 2026 and the recent festive period debt increase could be a sign of this projection.

Buy now pay later services can impact your credit history both positively and negatively. BNPL providers report payment histories to credit bureaus, and so consistent regular payment of the loan can positively impact an individual’s credit report. Late or missed payments on BNPL purchases are also reported to credit bureaus and can have adverse effects on a consumer’s credit score. The Centre for Financial Capability reported that 22% of users missed one or more repayments in the second half of 2023, which rises to 34 per cent when just looking at 18-34-year-olds, who are the biggest users of BNPL; a third of UK adults say they have used BNPL, a figure that rises to 40% among 18-34-year-olds. The average credit score in the UK is 644 on the Equifax scale, which is considered good, with 19.8% of people owning a poor credit score. This percentage is sure to increase with the Centre for Financial Capability also revealing that 29% of people who missed payments saw their credit score decrease and 27% had been contacted by a debt collection agency.

While buy now, pay later (BNPL) services can offer convenience and flexibility, they also carry a potential risk related to debt accumulation and financial mismanagement. Consumers need to use these services judiciously, understand the terms and conditions, and factor these into their financial planning to avoid falling into unplanned or excessive debt.