Jaywing's risk and analytics experts, Katie Stones, Will Watson and Alex Denby, reveal insights into consumer trends and BNPL regulations to discuss whether retailers should be conducting affordability checks ahead of Black Friday, Christmas and beyond.
1. THE LOW DOWN
BNPL WAS LAST YEAR'S FAVOURITE ACRONYM.
Providers flaunted the competitive power of this unregulated lending solution.
Retailers rapidly signed up to their offering.
Many consumers abandoned credit cards and other traditional methods of payment, including instant payment through debit cards.
But the industry has changed.
Despite the easy payment solution remaining popular amongst consumers and retailers, its future is uncertain.
Its rapid uptake across sectors has sparked scrutiny and headlines about consumer debt management and, soon, BNPL lenders will have to be approved by the Financial Conduct Authority (FCA) and conduct affordability checks on all potential customers.
BUT CUSTOMER APPETITE FOR THIS FLEXIBLE PAYMENT SOLUTION ISN'T SLOWING DOWN.
In fact, it’s proven beneficial to many consumers during the cost-of-living crisis.
of existing BNPL customers have increased the amount they are spending using BNPL (Credit Karma, 22)
of consumers state that BNPL is becoming more appealing in the cost-of-living crisis (Barclays, 2022).
Whilst these stats look promising for BNPL providers and retailers alike, one must consider that heightened BNPL use could be a result of inflation and the cost-of-living crisis, where consumers feel they must turn to this borrowing solution to keep up with their regular purchases.
According to the Director of External Affairs at StepChange, “There is rising evidence that buy now, pay later isn't just being used to buy discretionary items, like fashion, but also life's essentials, like groceries” (2022, Bloomberg UK).
For retailers using, or looking to use, BNPL providers, combining risk management strategies with knowledge of consumer trends and BNPL regulations is going to be key for responsible sales across this year’s seasonal events.