Lack of regulation causing consumer mistrust of Buy Now, Pay later
03 May 2023 – A survey of UK consumers shows concerns about the lack of regulation in Buy Now, Pay Later (BNPL) options, with only 16% of UK consumers deeming BNPL “trustworthy”. Almost half (45%) worried that unregulated BNPL could get them into debt, and 58% of respondents had never used BNPL options and wouldn’t consider using them. The survey commissioned by NewDay, one of the UK’s largest providers of consumer credit, also highlighted the importance of regulations in building trust, with 78% stating they would prefer a regulated BNPL option over an unregulated one even if that meant a longer application process.
The findings also showed a lack of awareness of BNPL as a form of credit, especially amongst younger people. Despite 40% of 18-34 year olds having used BNPL options, the largest age range to do so, 64% were unaware that it was a type of credit and 62% didn’t know of its potential impact on credit scores. 78% were unaware that missing BNPL payments could be classed as a ‘loan default’, which can show on credit records making it difficult to borrow in the future. In total, 48% of UK consumers didn’t know BNPL could impact credit records, and 61% didn’t know missing BNPL payments could result in a default being registered against their credit file.
The findings follow HM Treasury’s consultation on draft legislation to regulate BNPL credit, following concerns of potential consumer harm without suitable affordability checks in place.
Ian Corfield, Chief Commercial Officer at NewDay, says: “While BNPL continues to be a popular option for younger consumers, its broader appeal is being hampered by a lack of regulation causing mistrust. Added to this is a poor understanding of BNPL as a credit product and the potential impact on credit score and records. It’s clear more needs to be done to educate consumers, and the regulation of BNPL products needs to be accelerated. But as an industry we also have a duty to protect consumers and to lend responsibly. We have already proven it is possible to successfully operate such products in a regulated environment through our digital credit account Newpay, which requires affordability checks, and we applaud those others who have taken the initiative to bring regulated offerings to the market. BNPL is here to stay and greater regulation and protection for consumers will unleash its full potential.”