The UK’s Buy Now Pay Later (BNPL) market is poised for substantial growth, with payments expected to reach $34.28 billion in 2024, marking a 15% increase from the previous year.
The BNPL industry is anticipated to maintain strong momentum over the medium to long term, with a projected compound annual growth rate (CAGR) of 9.8% from 2024 to 2029.
By 2029, the gross merchandise value is expected to surge to $54.62 billion.
Britons turning to BNPL
As the cost-of-living crisis continues to strain household budgets, more Britons are turning to Buy Now Pay Later schemes to manage their expenses, including essentials like groceries.
This rising demand is fuelling the growth of the BNPL sector, with providers launching new products to capitalise on this trend.
However, the increase in BNPL adoption has also led to a concerning rise in consumer debt, particularly among younger users.
Reports indicate that nearly a quarter of BNPL users have incurred late fees, with younger consumers aged 18 to 34 being the most affected.
The inflationary environment has exacerbated the reliance on BNPL, with millions of shoppers using these payment options to fund everyday purchases.
In 2023, 11% of consumers used BNPL for grocery shopping, with this figure rising to 35% among frequent users.
The Financial Conduct Authority reported that nearly 14 million Britons utilised BNPL services in the six months leading up to January 2023.
Defaults growing
Despite the benefits of increased purchasing power, the risk of default is growing.
A significant portion of Buy Now Pay Later users faced late payment fees, with younger consumers being particularly vulnerable.
The Centre for Financial Capability highlighted that 34% of users aged 18 to 34 experienced missed repayment charges, while 7% to 10% of users aged 55 and above also faced similar issues.
As BNPL adoption continues to rise, it is crucial to increase awareness about the potential risks of late repayments to ensure sustainable growth in the industry.
To tap into the growing demand for BNPL services, companies are expanding their partnerships and launching new products.
For instance, Klarna recently partnered with Airbnb, allowing UK travellers to pay for their stays over time.
This collaboration is expected to expand to other European markets where Klarna already has a strong presence.
The UK BNPL market has experienced strong growth over the past year, driven by increased e-commerce penetration and the rising popularity of flexible payment options.
The industry is expected to see more strategic collaborations in the coming years, further supporting its growth and driving innovation in the sector.
As firms continue to widen their product offerings and distribution channels, the competitive landscape in the BNPL market is set to evolve, offering consumers more options and enhancing the overall payment experience.
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