A poll from Bain & Company found that the nature of buying now, paying later meant many people felt able to purchase items they would otherwise have saved for
As inflation sees Britain’s residence left with less and less of their paycheque after rent, utilities and food bills, the growth of the UK’s consumption-based economy depends on being able to get customers to part with cash they don’t have.
At the same time, despite apparently facing a ‘talent shortage,’ employers remain resistant to giving their staff a pay-raise that could fill this void. A number of entrepreneurs have tries to exploit this gap in the market, with different forms of alternative finance.
It is easy to see why merchants are increasingly signing up to allow BNPL providers on their vending sites.
A poll from Bain & Company found that the nature of buying now, paying later meant many people felt able to purchase items they would otherwise have saved for. As a result, 57% of merchants questioned already said they had benefitted from increased checkout or basket conversion on their website, due to BNPL. A further 47% said the order value had been boosted – while more than half felt their brand had accessed new customers due to BNPL involvement.
But while customers are able to access goods they might not have afforded, and merchants make quicker sales conversions, not everyone is positive about the advent of BNPL. It has also stoked fears that the unregulated financial product is encouraging unsustainable spending and reliance on debt.
According to the same study from Bain, only 21% of consumers said they “strongly agree” they can easily afford BNPL payments. While supporters of BNPL providers might say a further 48% said they “somewhat agree” with that, it hardly seems like a ringing endorsement, considering the levels of debt they could find themselves in while their incomes are thin enough to have to depend on alternative finance in the first place.
BNPL loans are typically interest free, as long as the user promptly makes full payments of the agreed instalments. The issue with this is that only some BNPL operators use affordability checks, while terms and conditions are not always thoroughly spelled out to online shoppers using one-click-buy buttons.
Meanwhile, regulators have been slow to respond to the phenomenon, meaning consumers may not be adequately protected from predatory behaviour at present.
The UK’s Citizens Advice recently commented that this made BNPL borrowing like quicksand – easy to slip into and very difficult to get out of.
Treasury proposals currently include introducing rules governing how BNPL firms treat customers in financial difficulty.