Despite its surge in popularity over the last several years, more and more Brits are struggling to repay their Buy Now, Pay Later (BNPL) instalments.
Research from the Centre for Financial Capability revealed that up to a quarter of those who have used BNPL have been charged with a late payment fee over the last six months. The figure rises further for 18-34 year olds who have missed at least one instalment payment.
This comes following what is typically a financially difficult time for consumers during and after the festive period, not eased anymore with the current economic climate and ongoing cost-of-living crisis Brits continue to endure.
In the same research carried out by the Centre for both 2022 and 2021, 2023 figures show a rise in anxiousness around budgeting for Christmas (30%), with more than a quarter attributing this to the current economic uncertainty in the UK.
This has led to a dependency on BNPL services, as 28% state they intend to use the service over the festive season as a result of not being able to entirely pay for the whole product.
Although becoming one of the more popular modern payment methods of the last several years, BNPL has often been met with criticism pertaining to financial risk and its regulatory uncertainty, particularly in the UK.
The Financial Conduct Authority (FCA) last October detailed that consumers utilising BNPL are more likely to be under financial strain and are also four times more likely to have missed a credit payment or bill commitment.
Whilst the UK financial regulator has made amendments to the framework surrounding BNPL and protecting consumers, Jane Goodland, trustee of The Centre for Financial Capability, stated that more regulatory action needs to be taken to safeguard consumers from potentially financial risk from BNPL services.
She stated: “For a third year in a row, our polling shows the high usage of BNPL across all age groups, despite some of the clear risks involved. The government has promised regulation on this market but we are still yet to see this.
“As trustee of a financial education charity, I recognise firsthand the urgent need to ensure that consumers are protected from dangerous financial trends, such as Buy Now Pay Later.
“At the very least, we must offer a high-quality and effective financial education to all people from a young age, so they feel equipped with financial resilience skills to face these emerging trends.
“Financial education is by no means a silver bullet, but financial education, coupled with government regulation on BNPL services, can ensure that people are best protected and do not face unnecessary financial suffering.”
Continuing to spread financial awareness and education for young people across the UK, the Centre of Financial Capability aims for every child to receive high quality education by 2030.