Over 57 per cent of European banking consumers have utilised buy now, pay later (BNPL) services, according to the latest findings from the European Banking Radar survey released by financial consultancy Kearney.
The adoption rate is even higher in the UK, with 63 per cent of consumers having used BNPL at some point. The study shows that larger retail banks have been slower to offer BNPL options, accounting for only 25 per cent of the offers available.
The survey, conducted annually across more than 12 European countries since 2020, highlights the widespread acceptance of BNPL among consumers. The primary reasons cited for using BNPL were cash flow management (22 per cent) and the ability to purchase desired products (21 per cent). Geographically, Sweden and Italy had the highest percentage of respondents (67 per cent) who had previously used BNPL.
Online purchases were the primary use case for BNPL, with 90 per cent of European users utilising the service for online transactions. Additionally, the study found that BNPL purchases tend to be smaller in value, with approximately 80 per cent of users deferring or splitting payments for purchases under €250.
Consumers who have not yet tried BNPL identified debt fears and concerns about credit scores as the main deterrents. However, the research shows that 70 per cent of customers have successfully made repayments on time, and only a small percentage (six per cent) have reported missing payments.
‘Stay in the game’
Kearney emphasises the need for banks to capitalise on the growing BNPL trend to avoid losing customers and revenue to specialised providers. The consultancy advises financial institutions to adapt quickly to meet evolving customer demands and provide more effective engagement with consumers.
“Given the widespread adoption of BNPL as an embedded finance product, it is surprising that the vast majority of BNPL transactions are still facilitated by specialised providers rather than financial institutions,” said Daniela Chikova, partner at Kearney.
“Banks need to act soon to stay in the game, or else they risk losing customers and revenue streams to newer players as embedded finance becomes widely adopted. We hope that some of the insights shared in this report will help banks drive more effective engagement with consumers.”
While Roberto Freddi, partner at Kearney, also added: “In this high inflationary environment, higher interest rates make the economics of providing ‘interest free’ BNPL more challenging, which could slow the pace of growth in the BNPL market.
“However, from a customer perspective, the inflationary environment with higher rates is exactly the situation where they value the flexibility of spreading the cost of purchases. Either way, BNPL is here to stay, and banks need to adapt now to meet ever changing customer needs.”