Third of UK adults unaware BNPL is borrowing

Almost half (47%) of 2,000 UK adults surveyed in February 2022 did not know that a person could be referred to a debt collector if they miss a BNPL payment, with 43% unfamiliar with the fact that BNPL providers can add late payment fees.

A third of people (32%) were also unaware that BNPL is a form of borrowing, and one in seven (14%) thought it was impossible to fall into debt from using BNPL. This rose to 26% among 18 to 34-year-olds.

According to the Financial Conduct Authority (FCA), there were £2.7bn worth of BNPL transactions in 2020, with research suggesting the market more than doubled to £5.7bn last year.

Since January 2021, more people have taken out BNPL than a mortgage, car finance or loan from a mainstream lender.

The cost-of-living crisis and reliance on credit suggests that reliance on BNPL will only increase during 2022.

Last year, the government announced a consultation ahead of regulation of the BNPL industry. Regulation is yet to be implemented but lenders also need to improve the UK’s financial literacy to protect borrowers.

Neil Kadagathur, chief executive officer at Creditspring, said: “Regulation is welcome but the misconceptions amongst borrowers, that BNPL is risk-free or isn’t a form of borrowing that can lead to debt, are a much bigger issue. Regulation won’t go far enough - lenders need to ensure they develop awareness amongst borrowers of the risks that BNPL poses.

“Borrowers must be protected – currently, they are in real danger of falling into another credit trap as they continue to rely on BNPL as a crutch to struggle through until payday”.