Ahead of the bustling Black Friday sales, a concerning revelation has emerged from Creditspring’s recent study. An astonishing 16 million people in the UK are still oblivious to the fact that using ‘Buy Now Pay Later’ (BNPL) services can lead to significant debt.
The study further uncovered that 31% of the general population doesn’t recognise that BNPL purchases could lead to financial liabilities. This lack of awareness is especially pronounced among younger demographics, with a staggering 51% of 18-24 year-olds, who are frequent BNPL users, under the misconception that BNPL cannot result in debt.
Similarly, 29% of people are unaware BNPL is a form of borrowing similar to credit cards. This percentage soars among the younger age group, where 39% are not aware that BNPL has risks.
These findings come at a time when Adobe predicts that £3.7bn will be spent via BNPL throughout November and December, with a total spend exceeding £17bn in 2023.
The research also highlights the growing popularity of BNPL, which was the third most preferred payment option last Black Friday, even surpassing cash. TSB’s research supports this trend, indicating that 42% of people plan to make purchases during the Black Friday sales, with 56% of these shoppers intending to use credit options. BNPL spending is expected to witness a 77% surge compared to the 2022 average.
However, the study reveals a worrying lack of understanding about the risks associated with BNPL. Half of the younger demographic were unaware of potential extra costs or late fees for missed payments, a figure slightly lower than the 41% national average. Nearly 46% of all respondents were also clueless about the possibility of being referred to a debt collector for missing BNPL payments.
Neil Kadagathur, CEO of Creditspring, said, “It’s hugely concerning that shoppers remain unaware of the risks of relying on BNPL for their purchases ahead of Black Friday. After a couple of years of rising costs, savings pots have been wiped out and household finances have been stretched to breaking point and with Black Friday landing before most people’s payday this month, many view BNPL as a crutch until payday without being fully aware of the risks of doing so.
“If used correctly, BNPL offers flexibility to UK shoppers – however, lenders don’t communicate the risks of entering these agreements clearly enough and there is a worrying lack of transparency in the total costs that shoppers face or the impact of not paying.”
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