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Buy now, pay later (BNPL) fintech services accounted for 12% of UK online spending last month, as the cost-of-living squeeze forces people to spread payments.
A total of £8bn was spent online in the UK, according to Adobe Analytics, with BNPL accounting for 10.7% more than it did in January 2022.
BNPL services are offered by an increasing number of fintech providers – Klarna being one of the biggest – giving consumers the opportunity to spread the payments of a huge range of purchases.
Using Adobe Analytics, the Adobe Digital Economy Index, which analysed tens of billions of visits to UK retail sites, also found that people are using BNPL to finance larger purchases, with the average order value in January 18% higher than the same period last year.
Suzanne Steele, managing director at Adobe in the UK, said: “While last week’s suggestion by the Bank of England that inflation may have peaked is good news in the mid to long term, the increased use of buy now, pay later services to spread the cost of January purchases shows that consumers are still keeping a close eye on their finances in the short term.”
In its Digital Economy Index, Adobe also revealed that the total amount spent online by UK consumers in January decreased by 1.4% compared with 2022. But the small reduction does not mask the increasing importance of online spending.
“Despite this short-term decline in online spending, the big picture is showing a continuous shift towards the digital economy, with UK consumers spending 39% more on online purchases compared to January 2020,” said Adobe.
Adobe’s Digital Economy Index also showed that shopping via mobile devices continues to become more popular, with about 60% of purchases taking place on smartphones in January, a 10% increase in share compared with last year. It revealed that, in total, consumers spent £4.7bn using mobile devices during the month.
BNPL firms are unregulated, but such is their growing customer base, the Financial Conduct Authority (FCA) used its influence last year to secure changes to the contract terms of BNPL firms, including refunding some customers who were unfairly charged.
The FCA used the Consumer Rights Act to assess the firms amid fears that there was a potential risk of harm to consumers because of the way some of the BNPL terms were drafted.
Consumer rights defender Which? had already called for stronger protection for consumers using BNPL products because fintech products accelerated and simplified its take-up.
Read more about consumer tech choices in the cost-of-living crisis
- Over a third (35%) of people who are struggling financially during the current cost-of-living crisis would change their bank account provider if it meant they could access tailored financial support.
- The cost-of-living crisis could spur innovation in the fintech sector as consumers look for help with managing their finances.
- Current inclement economic times in the UK blow headwinds into mobile comms sector, shaking customer loyalty with operators as over two-fifths of contract customers think they are overpaying.