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Consumers Turn To BNPL To Offset the Rising Cost of Inflation

As inflation continues to rise to a 10 year high, financial optimism amongst consumers has fallen for a second quarter in a row whilst the use of BNPL rises; TransUnion’s latest Consumer Pulse study has found. 

When asked how confident they were about the future state of household finances in Q4, only 48% of respondents said that their outlook was one of optimism, a figure that has dropped from the 61% recorded in Q2.

Worrying still, 31% of respondents said that Q4 has seen them experience a worse financial position than expected, a 4% increase from Q2.

The end of the furlough scheme, combined with growing cost of living pressures, has meant that consumer confidence indexes are at the lowest they’ve been all year, reflected in 75% of consumers saying they were worried about the rate of inflation.

The rise in living costs has eroded spending power, with 43% of consumers reporting that they’re moderating their spending. These figures are even higher among younger age groups: 47% for Gen Z and 61% for Millennials.

Shail Deep, Chief Product Officer, TransUnion
Shail Deep, Chief Product Officer, TransUnion

“Whilst it’s concerning to see consumer spending waning, the borrowing figures offer some reassurance,” comments TransUnion’s Chief Product Officer Shail Deep. “One in four say they still intend on applying for credit or are planning on refinancing their existing lines of borrowing in the next year, the same proportion as in Q3. The fact that alternatives to more traditional credit, such as buy now, pay later, are seeing continuing growth suggests consumers are looking at ways to spread costs as they weather current pressures.”

Indeed, spenders are increasingly turning to the buy now pay later (BNPL) financing option, with this sector experiencing significant growth during the pandemic. 35% of consumers stated that they used this type of payment in the last 12 months, alongside the rapid acceleration of ecommerce adoption and ingrained changes in consumer borrowing habits.

Despite the notion that BNPL is used almost exclusively by younger spenders, the data shows the adoption is across all age groups. 31% of Gen X’ers said they had used BNPL in the last year, in addition to 58% of Gen Z, and 60% of Millennials.

Crucially, consumers appear to be using such products out of the desire for greater flexibility, rather than necessity. According to this new data, half of those who had used BNPL products in the last three months said that they had done so in order to spread payments over a longer period of time.

“What used to be perceived as an option used solely by younger generations is now being harnessed across the board and our own analysis of this sector has shown that flexibility is the key driver here,” Shail continues. “With consistent consumer spending essential for the wider economic recovery post-pandemic, consumers need to have a range of avenues available to them and it’s encouraging to see that BNPL is helping consumers manage costs, with one in 10 using this over the Christmas period, according to our own survey.”


  • Tyler is a fintech journalist with specific interests in online banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

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