Personal finance website Money.co.uk has published its annual ‘Shop Now, Stress Later’ report. The title is a play on words inspired by Buy Now, Pay Later arrangements, because the website wishes to highlight its concerns about this sector.

It is especially concerned by the fact its survey of 2,000 BNPL users revealed that one in six (16%) consumers had purchased more than they could afford under a BNPL arrangement.

One in twelve (8%) of respondents said that they had been encouraged to enter into a BNPL arrangement as a result of the activities of so-called ‘influencers’. One in eight (13%) of the 18-24 age group said that this was the case.

Indeed, shopping in this way is now so popular amongst young people that 18 to 24-year-olds are now more likely to use BNPL than to pay for the goods using a credit card.

The average BNPL user owes £244.37 under this type of arrangement, and, on average, the survey respondents said it would take them nine months to clear their debts. Plymouth was the most indebted city, with £530.86 owed by the average BNPL user here.

There is also concern over a lack of understanding of BNPL arrangements. 29% said that they believed that repaying on time would boost their credit score, even though this is unlikely to be the case with BNPL.

The goods and services most frequently purchased under BNPL are:

  • Casual clothing (mentioned by 33% of respondents)
  • Eating out (31%)
  • Beauty products (26%)
  • Other clothing (23%)
  • Technology (22%)

The research predicts that the number of people using BNPL arrangements will rise significantly from 340 million in 2021 to 1.5 billion by 2026.

Money.co.uk notes that a recent advertisement from a leading BNPL provider was banned by the Advertising Standards Authority. However, it adds that, with Financial Conduct Authority regulation to commence later this year, BNPL promotions are not currently required to include prominent risk warnings, as might be the case for other forms of credit.

The website also acknowledges, with dismay, that before FCA regulation comes into force, there is no requirement for BNPL providers to conduct affordability checks. Additionally, BNPL purchases do not enjoy the Section 75 protection afforded to credit card transactions.

Sue Anderson, Head of Media at debt charity StepChange commented:

“While we wait for the proposals on how Buy Now Pay Later regulation will be implemented, we’d very much like to see retailers and  providers of these services putting in place clearer communication and stronger consumer protections – though we believe these cannot be left to chance, and need regulatory underpinning. It would be a good start to improve cancellation policies, and also not make BNPL an over-promoted option at checkout. Consumers must be put in full control of the services they use, and not put in a situation where they inadvertently find themselves acquiring debt that may cause them difficulty.”