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UK bank Barclays has said support for buy now, pay later (BNPL) regulation could save almost 900,000 UK adult consumers from problem debt, adding to the litany of findings Barclays has levied against BNPL during the past six months.
The research, derived from an Opinium survey in mid-May 2022 and in partnership with debt charity StepChange, found that “31 percent of current and former BNPL users say that BNPL has got them into unmanageable debt”, while “75 percent of those first-time users say their decision will be influenced by the retailer at the point-of-sale”.
When scaled up to the UK adult population, this creates 875,751 people who could benefit from BNPL regulation, suggests the research.
Keeping up with inflation
The study argues that the “rising cost of living is having a direct impact on the popularity of BNPL purchases”, with 36 percent of consumers saying BNPL “has become more appealing since inflation and energy costs began to climb”.
Rising demand for BNPL due to inflation was also forecast by VIXIO earlier this year.
Antony Stephen, CEO of Barclays Partner Finance, said: “Retailers are a vital gatekeeper in the lending process and it is crucial that they perform due diligence on the BNPL products they offer.
“However tempting it may be to evaluate BNPL payments purely on their acceptance rates or merchant fees, they need to go further and look at how responsible the lending process is behind each transaction.”
“Our research shows that the ambition is there: around nine in ten retailers support Barclays’ view that all credit providers should be subject to the same checks and balances,” said Stephen.
The study points to rising BNPL demand data from retailers, as “those that offer BNPL credit estimate that lending will account for nearly a quarter (22.1 percent) of sales by the end of 2022, rising from 18.7 percent today”.
“In addition, almost nine in ten (86 percent) say they have experienced a surge in demand for BNPL purchases since the start of the year,” the report says.
Richard Lane, director of external affairs at StepChange, said: “The gears are grinding slowly towards consistent regulation and consumer protection between buy now, pay later and other consumer credit.
“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. Just because it is short-term and interest-free doesn’t mean it isn’t a contributor to problem debt.
“Especially at the moment, with the cost of living biting, there is a high risk that people who may be struggling will turn to all available forms of borrowing to try to make ends meet. It’s therefore particularly important that adequate protections are in place to reduce the risk of borrowing turning into problem debt.”
‘Mind-boggling and irresponsible’
Alex Marsh, the UK boss of BNPL provider Klarna, has criticised Barclays, telling UKTN the research was “mind-boggling and irresponsible”, given the press release endorses Barclays’ “high-cost instalment credit product which charges 10.9 percent interest”.
“To lobby against interest-free and manageable buy now, pay later products, which HM Treasury just this week concluded are inherently lower risk than interest-bearing credit products [is irresponsible].”
Marsh also said that Barclays’ conclusions were “hugely patronising to UK retailers who already choose their credit providers based on responsible lending practices and quality of service”.
History of contention
Barclays has developed a reputation of conducting research that shows the dangers of BNPL.
In the last six months, the bank has published four research pieces from three separate surveys warning against consumers using BNPL.
This includes research warning that 40 percent of Gen Z consumers are feeling overwhelmed by BNPL repayments, research suggesting a lack of consistent affordability assessments for BNPL products is leading consumers to take out more debt than they can afford and research saying 40 percent of BNPL Christmas shoppers are unclear about what they were signing up to.
