Almost two-thirds of UK consumers have used Buy Now, Pay Later services

One of the leading global consultancies, Kearney, has announced the latest findings of its European Banking Radar, which includes a survey on the use of Buy Now, Pay Later (BNPL), conducted annually in 12+ European countries since 2020. The research finds that despite the rapid adoption of BNPL, with almost two-thirds of UK consumers now having used the technology (63%), larger retail banks are still slow to capitalise, with only one in four BNPL offers coming from a bank (25%).

Strong adoption across Europe

On average, 57% of respondents across all 13 countries in the Kearney survey have used BNPL at some point. The main reasons given by consumers for using BNPL were helping with personal cashflow management (22%) and the ability to purchase desired products (21%). In terms of geographical variation, consumers in Sweden and Italy were the most likely to have previously used BNPL, with 67% of respondents in those countries having experience with payment deferral for their purchases.

Small, frequent and online

The Kearney report highlighted that BNPL was mostly used for online purposes at checkout. Ninety percent of European BNPL users have used BNPL for a purchase made online compared to only 65% who have used it in a physical store.

Furthermore, while the majority of BNPL users (73%) take advantage of the payment deferral option up to five times a year and the rest use it six or more times a year, BNPL purchases tend to be relatively low value. Around 80% of BNPL users typically defer or split the payment for purchases valued up to €250.

Debt fears remain a deterrent

The major deterrent for those consumers who have not yet tried BNPL is fear of debt and the risk of lowering their credit score (31%). Other deterrents include concerns that BNPL might turn out to be an expensive option in the end (15%), while other people just prefer other forms of financing.

However, while debt fears persist, user experience with BNPL shows that 70% of customers have no issues with making repayments on time and only just over 6% report at least one missed payment.

Daniela Chikova, Partner at Kearney, said: “Given the widespread adoption of BNPL as an embedded finance product, it is surprising that the vast majority of BNPL transactions are still facilitated by specialised providers rather than financial institutions.

“Banks need to act soon to stay in the game, or else they risk losing customers and revenue streams to newer players as embedded finance becomes widely adopted. We hope that some of the insights shared in this report will help banks drive more effective engagement with consumers.”

Roberto Freddi, Partner at Kearney, added: “In this high inflationary environment, higher interest rates make the economics of providing interest free BNPL more challenging, which could slow the pace of growth in the BNPL market.

“However, from a customer perspective, the inflationary environment with higher rates is exactly the situation where they value the flexibility of spreading the cost of purchases. Either way, BNPL is here to stay, and banks need to adapt now to meet ever-changing customer needs.”