Buy now, pay later (BNPL) schemes were the fastest-growing online payment method in the UK last year, according to a report.
Such schemes are predicted to account for 10% of UK e-commerce spending by 2024.
Overall, BNPL spending in the UK will balloon from £9.6 billion in 2020 to £26.4 billion in 2024, the research predicts.
The global report was compiled by payment processing technology provider Worldpay, a brand of FIS (Fidelity Information Services).
It said 2020 “catapulted payments years ahead of where they were projected to be”, with rapid digital changes taking place against the backdrop of the coronavirus pandemic.
Pete Wickes, general manager, Europe, Middle East and Africa at Worldpay from FIS, said: “Buy now, pay later services continue to appeal to consumers’ thirst for seamless user experiences.
“The payments landscape is evolving at pace to respond to consumers’ drive for convenience and the ability to have more flexibility in their purchasing decisions.
“We predict that the BNPL sector will not slow down, with the UK market seeing double-digit expansion over the next few years.
“As this happens, it’s important that the frameworks that govern and protect consumers and merchants also adapt to ensure that there continues to be trust and reliability in payments technology.”
The report, covering 41 countries, said the UK’s e-commerce market is currently the third largest, behind China and the United States.
By 2024, it predicts that more than 20% of all purchases in the UK will be made online.
The UK e-commerce market reached £192 billion in 2020 and is expected to grow to £264 billion by 2024, the report found. This follows 13% growth from 2019 to 2020.
Online sales growth continues to be driven by mobile shopping, and in three years’ time the report predicts that 40% of of all online shopping in the UK will be done via mobile.
In early February 2021, it was announced that BNPL credit agreements will be regulated by the Financial Conduct Authority (FCA) following a surge in shoppers turning to such products during the coronavirus pandemic.
We’ve announced plans to regulate interest-free buy-now-pay-later credit agreements, giving consumers greater protection:
✅ affordability checks✅ fair treatment for customers facing difficulties✅ access to the Financial Ombudsman
— HM Treasury (@hmtreasury) February 2, 2021
The agreements, provided by firms such as Klarna and Clearpay, allow shoppers to spread purchase costs interest-free when online shoppers go to the checkout.
Evidence suggests schemes are particularly popular with women and younger adults.
But they have been criticised for potentially encouraging people to spend more than they had planned and getting into debt that they cannot comfortably pay back.
Under the plans, providers will need to undertake affordability checks before lending and ensure customers are treated fairly, particularly those who are vulnerable or struggling with repayments.
The Worldpay report said BNPL services were the fastest-growing online payment method in the UK for the second year in a row, and this trend is expected to continue over the next four years.
It also said that, within Europe, cash use declined particularly sharply in the UK and France last year, with less drastic declines recorded in Germany.
The report said: “Denmark, Sweden and Norway are expected to be nearly
cashless within five years, while above-average cash use will persist in
Germany, Italy, Spain and Poland.”
The Worldpay 2021 Global Payments Report was compiled using a survey of 46,000 consumers globally.
Mr Wickes continued: “This research shows the speed and scale of the transformation in consumer attitudes we have seen over the last 12 months.
“E-commerce is booming and now, more than ever, retailers need a strong online presence to capture consumer spend.
“The shop floor is now in the palm of our hands and consumers expect the same hassle-free and convenient retail experience – whether it’s on the go, in store or from the comfort of their living room.”