The usage of buy now pay later (BNPL) services in the UK has seen a significant increase, which has raised concerns from the Financial Conduct Authority (FCA) about the potential financial difficulties faced by many users. Recent research conducted by DRIts has revealed that approximately 14 million consumers, accounting for 27% of UK adults, have utilized BNPL services in the six months leading up to January 2023. This surge in usage is largely attributed to the worsening cost-of-living crisis in the country. In comparison, only 17% of UK adults reported using BNPL services in the 12 months leading up to May 2022.

The fashion sector has become a particularly popular industry for BNPL services, with major retailers forming partnerships with BNPL specialists. Consequently, there has been a noticeable increase in the number of individuals utilizing BNPL options for their purchases. However, frequent users of BNPL services are more prone to experiencing financial difficulties. Data shows that individuals who used BNPL services more than 10 times in the past year were over twice as likely to rely on high-cost credit products, with 48% of BNPL users compared to 22% of non-users falling into this category. Moreover, BNPL users were almost twice as likely to accumulate more debt on their credit products in the previous year, with 51% of BNPL users compared to 27% of non-users facing this issue. Additionally, 27% of BNPL users had missed payments on bills or credit commitments in the past six months, while only 6% of non-users faced the same problem.

The FCA, currently lacking regulatory oversight over BNPL products due to government delays, has expressed the urgent need for stronger consumer protection measures. The FCA has voiced concerns about potentially unfair and unclear contract terms within the sector and is pushing for greater safeguards. Collaborative efforts have been made between the FCA and BNPL providers, with the FCA providing guidance and expressing concerns about the contract terms of PayPal and QVC payments services. Both companies have voluntarily made their continuous payment authority terms more transparent and understandable for consumers. In a review of the unsecured consumer credit market, the FCA recommended that unregulated BNPL products be brought under its regulatory purview for better consumer protection.

For more information on the rise of BNPL services in the UK and the concerns raised by the FCA, you can visit these useful links:
1. FCA Outlines Its Approach to Regulation in the Buy Now Pay Later Market
2. Survey on UK Consumers’ Views on BNPL Services