Buy Now, Pay Later usage widespread across generations
Buy now, pay later (BNPL) will come under Financial Conduct Authority (FCA) regulation this month, meaning BNPL borrowers will benefit from stronger protections. As part of the changes, BNPL providers will be required to carry out proportionate affordability checks to protect consumers from unaffordable agreements, as well as offer support to consumers in financial difficulty. Consumers will also be able to complain to the Financial Ombudsman Service.
Ahead of the new regulation, TransUnion research is challenging BNPL stereotypes. Findings from the global information and insights provider show BNPL adoption now extends comfortably to consumers in their mid-40s, beyond the established younger user base.
A TransUnion consumer survey found that 18% of UK adults said they currently have a loan with a BNPL provider. When broken down into generational usage, 27% of Millennials said they have an active BNPL loan, compared to 25% of Gen Z consumers.
Across generations, BNPL has emerged as the second most popular form of short-term credit. When asked what their preferred form of short-term credit is, 21% of all consumers in the survey said BNPL, trailing only credit cards at 51%. Notably, Millennials exhibit the highest reported BNPL usage, with 45% saying they have had a BNPL loan at some point, outpacing Gen Z at 39% and Gen X at 37%, and significantly higher than Baby Boomers at 15%.
TransUnion’s research shows BNPL usage appears to be maturing, reflecting a longer-term shift in attitudes as it continues to establish itself as an everyday payment product. Looking ahead, approximately one-third of both Millennials (34%) and Gen Z (32%) plan to get a BNPL loan within the next 12 months.
Madhu Kejriwal, chief executive officer of TransUnion UK and Europe commented: “Widespread BNPL usage shows it has moved beyond the early adopters to become an increasingly embedded part of the credit landscape. While younger consumers were quick to lead the way, we’re now seeing Millennials more consistently integrate BNPL into everyday financial management.
“As the market evolves, the priority for the industry is ensuring these solutions support long-term financial wellbeing while meeting consumers changing expectations. As an early mover in incorporating BNPL data into credit reporting, TransUnion remains committed to helping consumers manage their finances, while keeping payment behaviour visible and borrowing accessible and affordable.”
James O’Donnell, TransUnion’s director of research and consulting, added: “This survey demonstrates that BNPL continues to mature. Its widespread adoption shows its appeal to a broader spectrum of age groups. This also highlights the importance of the forthcoming BNPL regulation when the Financial Conduct Authority (FCA) will start regulating the industry from July 15, with the aim of reducing the risk of harm to consumers, while enabling the market to continue to innovate and grow sustainably.”
TransUnion was the first credit reference agency in the UK to begin accepting BNPL information into credit files and has continued to work with providers to support the upcoming regulatory changes. TransUnion provides proportionate solutions and services that manage risk and preserve the customer buying experience.
Now increasingly part of the mainstream consumer credit mix, it’s important for consumers to understand some key points for responsible BNPL use:
- Check the repayments: make sure you are familiar with how much you need to repay and when payments will be due – missed payments can hurt your credit file.
- Consider which credit product best suits your needs: it may be that a 0% credit card is better for your purchase or better suited to your lifestyle. You should generally consider how BNPL fits into your wider financial picture.
- Avoid taking too many plans at once: because BNPL is easy to use and often interest free, it can be tempting to take on several plans at once. Try not to overstretch yourself with too many BNPL agreements at one time as this can make repayments harder to manage.
- Regularly monitoring your credit report can be a helpful step in understanding your financial standing. You can request a copy of your statutory TransUnion credit report for free through the TransUnion website, or access it for free via Credit Karma, MoneySuperMarket Credit Monitor, or TotallyMoney and a wide variety of banking apps, including NatWest, Lloyds and Halifax.
- Lending partners preparing for upcoming FCA regulation can take action now by connecting with their TransUnion account manager or visiting Affordability Isn’t Static: Smarter Lending Strategies to explore how BNPL data and affordability solutions can be implemented today.