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Calls for Enhanced Consumer Protection as BNPL Accounts for 12% of UK’s January Spending

As UK online spending totalled £8billion in January, ‘Buy Now Pay Later’ (BNPL) services covered over £1billion; revealed Adobe.

The cost of living crisis has forced UK consumers to evaluate their spending habits, look for new ways to budget and consider BNPL. UK consumers spent a total of around £8billion online in January 2023. This spending total is 1.4 per cent less than throughout January 2022, revealed Adobe Analytics data.

With the average cost of purchases rising, due to a range of factors including rising interest rates, this suggests that UK customers are now much more price-conscious than before.

Adobe data also highlights an increase in the use of BNPL in the UK. Consumers used BNPL in 12 per cent of online purchases to spread costs over multiple months. Despite a reduction in spending since 2022, the use of BNPL rose by 1.3 per cent compared to January 2022.

The January average order value for online BNPL was also up 18 per cent year-on-year, showing that more consumers are using the service for more expensive items. It appears that the key drivers of these changes in the UK are continuing high levels of inflation and the cost of living crisis.

Suzanne Steele Adobe BNPL UK
Suzanne Steele, VP and managing director for Adobe

Suzanne Steele, VP and managing director for Adobe, commented on the data trends.

Steele said: “There was a year-on-year drop of just 1.4 per cent in January online spending. This shows that the post-Christmas sales period still holds great importance for retailers and shoppers alike.

“While the suggestion by the Bank of England that inflation may have peaked is good news in the mid-to-long-term, the increased use of buy-now-pay-later services to spread the cost of January purchases shows that consumers are still keeping a close eye on their finances in the short term.”

Enhanced legislation required to protect consumers

As BNPL services continue to grow, so have concerns over a lack of protection in place for consumers.

Sameer Pethe Adobe BNPL UK
Sameer Pethe, partner at Kearney

Sameer Pethe, partner at business consulting company Kearney, explains that the industry needs to do more to protect customers. Pethe said: “[The] news from Adobe Research is a clear sign that the underlying factors that have fuelled the growth in BNPL. It also shows, more broadly, that embedded finance, is here to stay. Our research consistently shows that millennials and Gen Z prefer to consume credit in a manner that doesn’t appear as credit, particularly when it is seamlessly integrated into their buying journey.

“It’s unsurprising that the current economic environment has led to a rise in BNPL use in the UK. On one hand, higher interest rates and the cost of living crisis would naturally increase the attractiveness of the BNPL product for customers.

“On the other hand, the same factors also act as headwinds as higher funding costs, higher impairments, and a slowdown in customer discretionary spending impact the top and bottom lines of the BNPL players. While cost-of-living issues drive the uptake of BNPL, the industry needs to ensure that it protects customers. The industry needs to assess affordability and appropriateness of the product.

“Concerns over consumer debt are valid, but the sector is well aware of the risks and working to address them. We expect that new legislation will be introduced to enhance consumer protection, covering issues such as affordability checks, data sharing with credit reference agencies, and guidelines on forbearance and collections.

“Draft legislation was meant to have been published by end of last year but hasn’t been published yet. Given the huge scope of the regulatory change agenda (e.g. Edinburgh reforms), delays in BNPL legislation wouldn’t be a surprise.”

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