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Do the new FCA regulations of today help or hinder the BNPL schemes of the future?

The use of Buy Now Pay Later (BNPL) for both online and in-store purchase payments is steadily increasing, especially with brands clearly promoting this as a benefit in order to drive revenue. This, however, is increasing in tandem with stricter regulations imposed by the FCA on providers to promote sensible spending behaviours.

In our new report, we delve into consumer attitudes and behaviours towards BNPL and assess the impact of the change in regulation.

Our Consumer Omnibus surveyed 2,100+ Nationally Representative UK consumers to gain insight into the usage behaviour of BNPL, the implications of regulatory changes and what this means for both BNPL providers and users.

BNPL usage is ever-growing

The growth of BNPL is notable, with a usage rate of 12% among UK residents in 2021, subsequently rising to 16% by 2022. As of 2022, around 17 million consumers in the UK and 360 million globally have used BNPL services and in the first half of 2022 BNPL apps reached almost 10 million downloads.

Now, here in 2023 – two in five (40%) of those we surveyed claimed to have used a BNPL service to pay for an online or in-store purchase, with 25% expressing their openness to using it in the future.

Users / considerers prioritise getting a ‘good deal’ over regulation

67% of users/considerers say that they would only use BNPL providers that are regulated by the FCA – giving the upper hand to those already regulated, but also highlighting the threat that a third of consumers are indifferent to this.

And when choosing a BNPL provider, the opportunity to obtain a favourable deal outweighs regulatory considerations. A significant majority (75%) of users/considerers express a preference for BNPL providers that offer favourable deals.

Currently, there is limited level of awareness of government regulation plans

It is understandable given the cost-of-living crisis that BNPL users/considerers are most keen on getting a good deal but perhaps this is influenced by a lack of awareness of the recent Government publication and plans to regulate the credit agreements in line with the FCA to protect consumers. Only 39% of users/considerers are aware of the Government’s plans.

And for a number of users, BNPL regulation acts as a deterrent

There is a business risk with the regulation changes, as 11% of those who have used BNPL state that they wouldn’t use it again, and 29% saying they’d use it less, as a result.

This makes up 40% of those who have used BNPL, expressing that they’d be somewhat deterred from using BNPL providers by regulation.

Does this serve as an alarm bell for brands? How can you communicate compliance to customers and prospects?

BNPL providers can do more to protect themselves as well as consumers

Awareness of regulation is low and whilst the majority express openness towards regulatory changes, recognising the need for them (for a notable minority), regulation is a barrier.

Tip: BNPL providers need to ensure that customers are aware of the FCA regulations, and understand the benefits they will bring.

BNPL providers need to determine how to proceed and enhance clarity in their communication. By doing so, you will significantly improve consumer experience, mitigate risk behaviours and in the long term, earn their trust and loyalty.

Do you understand the needs of your customers? 

Here at Savanta, business strategy is what we do best.

Our approach puts your customers at the heart of decision making, with the aim of understanding the strengths and weaknesses; driving sales and growth by strengthening your brand’s position and identifying opportunities that will set you apart from competitors.

For more information or to see how we can help, contact us at: [email protected]

Download the full report

To read more on this topic and find out what this means for BNPL providers, download our full, free report here.

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