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Cost of Living Crisis Drives 47% of UK Consumers Towards BNPL to Improve Credit Scores

UK consumers are becoming increasingly likely to use shorter-term credit options such as Buy Now, Pay Later (BNPL) during the cost of living crisis. A new Marqeta study reveals that 38 per cent of UK consumers have used BNPL to make ends meet during the last 12 months, increasing to 61 per cent amongst 26 to 34-year-olds.

Marqeta, the modern card issuing platform, has released its 2023 State of Credit report – which finds that UK consumers have been increasingly reliant on credit in the last year, with 53 per cent of respondents reporting that they are now routinely using credit cards to make ends meet.

Via its survey of 3,000 consumers globally, including 1,000 in the United Kingdom, Marqeta found that respondents believe the increased cost of living makes it harder to make minimum monthly payments on their credit cards (46 per cent). Respondents also reported accessibility issues, as 46 per cent of UK respondents who have applied for a credit card in the past 12 months had their applications denied.

As a result, consumers are turning to new credit options and are using BNPL services as a tool to help build credit and secure access to additional credit services. Forty-seven per cent of UK respondents reported that they are looking to build a credit history or improve their credit score and 61 per cent of them confirmed they were interested in using BNPL to further improve credit scores and eventually get a credit card.

Forty per cent of consumers are very interested or somewhat interested in being offered the opportunity to use BNPL services by their current credit card provider, where they would be able to pay back a purchase over time for a small fee, rather than being charged interest.

Why are consumers opting for BNPL?

For BNPL users, the lack of interest fees was a popular feature, and 47 per cent of people who had used BNPL services in the last 12 months said they chose it because of zero interest.

Other motivations behind why consumers are turning to BNPL included convenience (46 per cent), flexibility (42 per cent) and help with budgeting (45 per cent). Interestingly, 15 per cent of consumers surveyed chose to use it because they had no other access to credit.

Todd Pollak, chief revenue officer at Marqeta, BNPL UK Credit
Todd Pollak, chief revenue officer at Marqeta

Todd Pollak, chief revenue officer at Marqeta, said: “BNPL appeared on the market as a strong challenger to the credit card giants, and was even termed a ‘credit card killer’.

“However, during this period of economic uncertainty, consumers are becoming more savvy about the different ways to access credit and are doing so in the ways that best suit them. As a result, we are seeing both pressure for traditional credit providers to offer more flexible credit services, and UK consumers using BNPL to access and build credit, sustain a good credit score and get access to credit cards.”

UK consumers show brand loyalty

UK consumers are becoming more reliant on their favourite brands to provide credit products with 31 per cent of respondents looking for a recognisable brand they trust when choosing to apply for a new credit card, compared to 21 per cent of US respondents.

Twenty-four per cent of UK respondents own a credit card affiliated with a brand (such as British Airways or Tesco credit card), while 54 per cent consider themselves a customer of the brand or store, instead of the bank that provides the physical card, and 47 per cent consider the brand to be responsible for customer service.

The report shows that payment cards and credit cards are the gateway to additional financial products, with 25 per cent of respondents reporting that they have more than one financial product from their credit card provider and 42 per cent confirming they had a credit card first and added additional financial products over time.

Pollak concluded: “Payment cards in general, and credit cards in particular have become the new front door to the banking industry. Brands and banks can offer these to deepen their relationship with customers and increase revenue.

“Going forward, we are likely to increasingly see the integration of financial services into non-financial products, giving consumers more seamless access to credit and the embedded finance experiences they require.”

Author

  • Tom joined The Fintech Times in 2022 as part of the operations team; later joining the editorial team as a journalist.

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