Buy now pay later (BNPL) is currently the fastest growing online payment method in the UK, with a growth rate double that of bank transfers and more than triple that of digital wallets. Buy now pay later is a service that allows consumers to shop online and place and receive orders while paying for them later.
We carried out some research to see if buy now pay later providers are disrupting the credit card industry and how we pay for products.
There are numerous different buy now pay later platforms, but which ones are the most popular? In terms of app downloads in the UK from January 2020 to the end of July 2020, Klarna was the most popular, with 986,000 downloads. This is more than double the number of downloads of My Argos Card (435,000), which was the next most downloaded BNPL app. In third place was Clearpay (298,000), followed by Laybuy (162,000) then Openpay (44,000).
| Company | Number of app downloads, January-July |
|---|---|
| Klarna | 986,000 |
| My Argos Card | 435,000 |
| Clearpay | 298,000 |
| Laybuy | 162,000 |
| Openpay | 44,000 |
Online purchases using buy now pay later services are growing at a rate of 39% a year, with market share set to double by 2023. In fact, nearly 9.5 million Brits said that they avoided buying from retailers that don’t offer BNPL options at the checkout. This popularity looks set to continue, with 8.6 million Brits (13%) planning to use BNPL services more in the future.
The number of UK brands offering buy now pay later options is also increasing, making it a viable way to pay for a lot of goods. For example, Klarna saw a 20% increase in UK brands using its service during April 2020. This is understandable, as BNPL options benefit retailers by increasing customer loyalty and basket conversions and boosting sales by up to 30%.
Klarna is based in Sweden but is growing rapidly in the UK. In March 2020, it announced that it had reached 7 million UK users, twice the amount that it had at the same time last year.
In the UK, the Klarna app (on both iOS and Android devices) has experienced a substantial increase in monthly active users. In just a year and a half, there has been a 3,143% increase. In December 2018, the app had 14,000 active users per month, and by July 2020, this number had risen to 460,000.
Find out which shops accept klarna payments
| Month | Monthly active Klarna users |
|---|---|
| Dec 18 | 14,196 |
| Jan 19 | 17,126 |
| Feb 19 | 27,243 |
| Mar 19 | 37,130 |
| Apr 19 | 49,975 |
| May 19 | 75,984 |
| Jun 19 | 116,145 |
| Jul 19 | 142,602 |
| Aug 19 | 127,897 |
| Sep 19 | 132,135 |
| Oct 19 | 138,941 |
| Nov 19 | 214,929 |
| Dec 19 | 193,163 |
| Jan 20 | 186,190 |
| Feb 20 | 237,933 |
| Mar 20 | 211,078 |
| Apr 20 | 230,068 |
| May 20 | 308,400 |
| Jun 20 | 406,770 |
| Jul 20 | 460,414 |
| Jul 20 | 460,414 |
| Jun 20 | 406,770 |
| May 20 | 308,400 |
| Apr 20 | 230,068 |
| Mar 20 | 211,078 |
| Feb 20 | 237,933 |
| Jan 20 | 186,190 |
| Dec 19 | 193,163 |
| Nov 19 | 214,929 |
| Oct 19 | 138,941 |
| Sep 19 | 132,135 |
| Aug 19 | 127,897 |
| Jul 19 | 142,602 |
| Jun 19 | 116,145 |
| May 19 | 75,984 |
| Apr 19 | 49,975 |
| Mar 19 | 37,130 |
| Feb 19 | 27,243 |
| Jan 19 | 17,126 |
| Dec 18 | 14,196 |
BNPL is a rapidly growing online payment method, with 37% of Brits saying they have used buy now pay later, according to our research. But who is behind this recent growth? Find out the differences between generations, genders and regions in the UK below.
According to our research, younger generations are far more likely to use buy now pay later services. The generation using BNPL the most is millennials (1981-1996), with 54% using this online payment method. Generation Z is also following this same trend, with 50% saying they use buy now pay later. It’s no surprise that younger generations can’t seem to get enough of BNPL. Klarna, Clearpay and Laybuy are all highly active on social media, marketing themselves to millennials and generation Z through organic and targeted ads, to great effect.
Older generations are also using buy now pay later methods, but not to the same extent. For example, only 23% of baby boomers and 12% of the silent generation use these services.
| Generation | Proportion using BNPL |
|---|---|
| Generation Z (1996+) | 50% |
| Millennials (1981-1996) | 54% |
| Generation X (1965-1980) | 37% |
| Baby boomers (1946-1964) | 23% |
| Silent generation (1928-1945) | 12% |
Our research found that buy now pay later services are more popular with men than women, with 41% of men saying they use them, compared to 33% of women.
| Gender | Proportion using BNPL |
|---|---|
| Men | 41% |
| Women | 33% |
Our research also found that the use of buy now pay later services varies across different regions of the UK. London has the greatest percentage of buy now pay later users, with 48% of Londoners using this payment method. This is followed by residents of the East Midlands (40%) and the South East (38%).
The region with the lowest percentage of BNPL users is East England, with only 31% of residents ever using buy now pay later services.
| Region | Proportion using BNPL |
|---|---|
| London | 48% |
| East Midlands | 40% |
| South East | 38% |
| North West | 36% |
| South West | 36% |
| Yorkshire and the Humber | 36% |
| Scotland | 35% |
| North East | 34% |
| Northern Ireland | 34% |
| West Midlands | 33% |
| Wales | 33% |
| East England | 31% |
According to our 2020 research, just under two-thirds (63%) of people are not currently using buy now pay later services. This leaves around 19.4 million people (37%) who have used or are using them.
Of those using this type of payment method, 36% said they are using them the same amount as they were before lockdown. Over half (52%) of BNPL users are using these services more during the COVID-19 period, with 32% saying they will continue to do so and 20% saying they will use them less often after COVID-19. 12% of BNPL users said they have used these services less over lockdown, but some of these people (4%) said they are likely to use them more in the future.
| How much are shoppers using BNPL services? | Percentage |
|---|---|
| Using them less in lockdown but will use them more often in the future | 4% |
| Using them less in lockdown and will continue to do so | 8% |
| Using them more in lockdown but will use them less often in the future | 20% |
| Using them more in lockdown and will continue to do so | 32% |
| Using them the same amount as before lockdown | 36% |
We also analysed the main six reasons why shoppers are using buy now pay later services. Our data shows that the main reason that people are using buy now pay later is because of its ease and convenience (44%). The ability to spread costs over time is the next most popular reason (41%), followed by interest-free payments (39%) and the ability to pay for purchases that individuals couldn’t afford otherwise (30%).
| Why do shoppers use BNPL services? | Percentage |
|---|---|
| They're easy and convenient | 44% |
| I can spread costs over a longer period of time | 41% |
| To access interest-free payments | 39% |
| To pay for purchases I couldn't otherwise afford | 30% |
| To try on items that are delivered to me before I am charged for them | 28% |
| I don’t want to use or take out a credit card right now | 27% |
With job losses and economic uncertainty rife during the COVID-19 period, consumers have been playing their finances safe. For example, credit card spending fell by 50% at the start of lockdown. While the cancellation of holidays is one plausible reason for the decline, there’s evidence for another, which is that a notable number of consumers were looking to alternative payment options instead.
Our research found that over a quarter (27%) of Brits who have used BNPL services more recently – or plan to do so – cited not wanting to use or take out a credit card as a reason for choosing these services. There was a difference between generations as well, with a third (31%) of generation Z citing this as a reason, compared to under a quarter (23%) of generation X.
Additionally, we found that barely half of millennials own a credit card (51%), compared to 71% of generation X. Of the millennials who don’t have a credit card, 93% never plan to take one out.
Millennials and gen Z have definitely shown an aversion to credit and a willingness to adopt alternative payment methods, particularly BNPL. Younger generations look at this payment method like a budgeting tool, and many see credit cards as an easy way to get into debt.”
The offer of interest-free instalments and no hidden fees allows shoppers more flexibility but also can lessen their perceived risk of debt, and lead to overspending and ensuing problems. This has drawn criticism for the BNPL industry from the media and certain charities.
Finder research found that 41% of those who are increasingly using BNPL cited the ability to spread the cost of payment over time as a key factor, while 30% claimed to use it to pay for purchases they can’t otherwise afford.
The FCA is not currently regulating BNPL services (beyond those offering finance) but has said that consumer credit is one of five priorities for its Business Plan in 2020-21, so it is likely to be monitoring what happens in this area.
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