UK BNPL Volumes Jump Nearly 20% Amid Increased Scrutiny
British consumers are increasingly embracing buy now, pay later (BNPL) plans amid increasing government scrutiny.
Activity in the sector climbed to around $27 billion in 2024 last year, an almost 20% increase, Bloomberg News reported Thursday (Jan. 16), citing figures from GlobalData. It’s a boom being driven by companies such as PayPal and Klarna, plus newcomers to the U.K. like Affirm.
“Affirm is stepping into a competitive landscape,” Sameer Pethe, a partner at consultant Kearney, told Bloomberg. “Merchants who haven’t plugged in a point-of-sale solution aren’t many.”
The report also notes that some retailers — such as eCommerce marketplace Very and Sports Direct — have launched their own BNPL services, letting customers make purchases in a series of installments with no interest or credit checks.
“The UK is one of the world’s leading BNPL markets, with a high level of maturity, penetration, and competitiveness,” said Matt Purnell, an analyst at Juniper Research, adding that the country has surpassed Sweden — former leader in this area — in terms of volumes.
According to Bloomberg, the BNPL market in the U.K. has increased tenfold since 2019, driven by a cost-of-living crisis, higher interest rates from other forms of credit, and the disappearance of alternative payday loans.
However, the report said, new entries into this space are jumping into what could be a declining retail market. Shares in the U.K.’s leading shopping chains have fallen this month after reporting lackluster holiday sales.
The sector is also facing increased regulation, with Great Britain’s Financial Conduct Authority putting together rules that are set to go into effect next year.
“Our approach will give shoppers access to the key protections provided by other forms of credit while providing the sector with the certainty it needs to innovate and grow,” then-Economic Secretary to the Treasury Tulip Siddiq said last year.
The new rules require BNPL providers to make sure customers can afford repayment before offering a loan, and to issue “clear, simple and accessible” information about loan agreements in advance. The regulation also says BNPL companies would need to offer refunds if consumers run into problems with the products they purchase.
Meanwhile, regulators in America are calling for greater study into the BNPL sector after determining that buy now, pay later borrowers held higher balances on other credit lines.
“The importance of BNPL in the credit profiles of BNPL borrowers underlines the need for further research to understand how this growing financial product causally impacts borrowers’ financial health,” the Consumer Financial Protection Bureau (CFPB) wrote in a report issued earlier this week.
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