Buy Now Pay Later: a review of the market, risks and trends, consumer understanding, impact and outcomes

In recent years, there has been a rapid increase globally in the use of Buy Now Pay Later (BNPL) products. In the UK, it’s estimated that 10.1 million people have used BNPL in the past 12 months.

As part of the UK Strategy for Financial Wellbeing, the Money and Pension Service (MaPS) has commissioned the Behavioural Insights Team (BIT) to explore how consumers use and manage their credit – in particular BNPL related products – and how to better support consumers. As part of the strategy, MaPS is working in conjunction with organisations across the UK to see 2 million fewer people often using credit for food and bills.

This report provides an overview of the scale and nature of the BNPL market in the UK. The report also identifies good practice and potential solutions to support BNPL users to better manage their credit.

• BNPL is a rapidly growing in users, merchants and providers.
• The majority of BNPL users are under 40 years old, but demand is increasing across all user groups.
• Awareness, accessibility and affordability are three key drivers for the increase in BNPL adoption.
• People are increasingly likely to use BNPL for day-to-day essentials.
• The ‘Struggling’ and ‘Squeezed’ are more likely to struggle to manage their BNPL payments.
• Lack of understanding of BNPL products and limited transparency in individuals’ credit profiles could pose a risk to individuals’ financial wellbeing and the wider economy.
• Regulations and behavioural nudges have shown to be promising in encouraging better credit management.
• Of the interventions tested in the survey, people were most supportive of repayment reminders, which are already offered by some BNPL providers.

We hope these findings will be useful for:

• policymakers
• BNPL providers, and
• any stakeholders interested in how to best support BNLP users to better manage their credit.

This project was part of the Financial Capability Lab, a programme funded and overseen by the Money and Pensions Service and implemented by the Behavioural Insights Team. The lab is a multi-year programme to develop and test innovative ideas to improve financial wellbeing and demonstrate paths to scale.