Young adults turn to ‘buy now pay later’ schemes during lockdown
Research from Comparethemarket found that nearly a quarter (23%) of 18-24 year-olds are more likely to use BNPL schemes to fund purchases since the government lockdown.
While only 16% of Generation Z said they had bought items using BNPL, of those who had, almost two thirds (64%) said they had spent more than they would normally on this type of purchase.
By contrast, only 7% of the rest of the UK adult population have made a BNPL purchase since the lockdown was imposed in late March.
In fact, wider public sentiment may be turning against this form of consumer credit, with over half (54%) of respondents saying they would never use a BNPL scheme, and two-fifths (40%) believing it is inappropriate for retailers to advertise these schemes.
BNPL schemes are offered by retailers and allow shoppers to spread the cost of a purchase over weeks or months. Firms charge penalties for missed payments.
Retailers may be placing increased focus on BNPL payments to sell products at a time when the pandemic has placed significant pressure on the sector. Nearly a fifth (18%) of shoppers had noticed more BNPL plans being offered to them when shopping online since the lockdown was imposed. This figure jumps to 33% among Generation Z.
The Financial Conduct Authority (FCA) recently announced a three-month interest payment freeze for individuals using BNPL schemes and facing financial difficulties due to Covid-19. However, concerns remain around how easy people find managing their debt and staying on top of payments once they have used these schemes.
Separate research by Comparethemarket before lockdown found that nearly half (45%) of those who used a BNPL scheme in the last year had missed at least one payment.
A similar number (48%) said they had incurred additional fees for a missed payment, and 56% said that missing a BNPL payment resulted in them being unable to pay back other debt payments, such as credit card bills, loan repayments or overdraft fees.
John Crossley, head of money at Comparethemarket, said: “Our research suggests that young people in particular may be turning to alternative credit schemes at a time of growing economic uncertainty. There remain serious concerns, however, over some people’s ability to keep track of their debt and prevent bills from racking up.
“The latest payment freeze announced by the FCA on buy now pay later purchases is welcome news for those struggling with keeping on top of current payments. Fees and interest terms differ between BNPL providers, but customers should be aware that interest on purchases will still accumulate during the payment freeze and will be payable after the three-month break.”