37% of consumers estimated to be using BNPL

Buy Now Pay Later (BNPL) specialist travel agency, Butter has predicted that the UK BNPL sector will be worth £26.8bn by 2024, a 175% increase driven by an increasing market share of the UK’s e-commerce market.

The company says that the BNPL sector has established a firm foothold within the UK, driven in prominence by the arrival of Swedish challenger bank, Klarna, in 2014.

The company estimates that 24.8 million consumers now choose to spread the cost of online purchases within the UK, 37% of the total population.

The research indicates that London is home to the most BNPL users, with 4.3m consumers using BNPL providers, nearly half of the total population (48%). At 907,780, the North East is home to the lowest total number of BNPL users, while the East of England is home to the lowest number as a proportion of the total population (31%).

Although a notable percentage of the UK population has already adopted this method of transacting, it’s thought that the BNPL sector currently accounts for just 5% of the current e-commerce market within the UK.

Digital and mobile wallets remain the most dominant form of e-commerce (32%), with debit cards (29%), credit cards (21%) and bank transfers (6%) also proving more popular than BNPL at present.

Despite this small percentage of market share, the 5% held by BNPL still equates to a respectable value of £9.8bn for a sector that is still in its relative infancy. However, Butter’s research shows that this value is expected to grow considerably over the coming years.

According to further research by World Pay, the UK e-commerce sector as a whole is predicted to increase by £72.9bn in value by 2024, a 37% increase on its current value of £195.28bn. This will place the total value of the UK e-commerce market at £268.15bn in just a few short years.

At the same time, the BNPL sector is expected to double its market share to a total of 10% by 2024. This would see the value of the BNPL market increase by £17.1bn, a 175% increase that would place the total value of the sector at £26.8bn.

Butter says that It is clear that a generational change is leading this charge for the BNPL sector. A recent report from Finderrevealed that just 12% of the Silent Generation and 23% of Baby Boomers have adopted the BNPL offering. However, this climbs to 37% of Generation X, increasing even further to 54% of Millennials and 50% of Generation Z.

This greater acceptance by younger generations suggests that the BNPL sector holds far greater growth potential during the long-term, as Tim Davis, co-founder of Butter, explains.

Timothy Davis, Co-Founder and CEO of Butter, said “Millennials and Generation Z are fast becoming the predominant generations, both in terms of size and where economic spend is concerned. This is likely to cause a further shift in consumer behaviour as these generations are already showing a greater tendency to adopt new methods of transacting via the e-commerce space.”

“Debit, credit cards and digital wallets will no doubt remain the preference for many, but the likes of pre-paid cards and cash on delivery as methods of transacting are likely to be resigned to the history books.”

“It’s in these areas that we will see BNPL take further market share initially, although as the process becomes more normalised, we expect the sector to increase in prominence on all fronts.”

“We’re already seeing this normalisation happen as a new wave of providers have worked hard to increase sector standards. This has been done with a focus on responsible lending and a consumer relationship built on transparency and trust.”

That said, there are still milestones to be reached and the first of these must be the full regulation of all BNPL providers by the FCA. While this is currently a requirement for bonafide lenders offering finance such as Butter, we hope to see this become an industry-wide requirement sooner rather than later.”

Market sector	2020	2024 Estimate	Growth Estimate	Growth Estimate (%)
UK e-commerce market turnover (GBP billion)	195.28	268.15	72.9	37%
UK BNPL market turnover (GBP billion)	9.8	26.8	17.1	175%
BNPL Sector Market Share	5%	10%	N/A	5%
Sources	World Pay	World Pay	Butter	Butter

 

Location	Estimated use of BNPL (%)	Est population	Estimated use of BNPL
London	48%	8,961,989	4,301,755
South East	38%	9,180,135	3,488,451
North West	36%	7,341,196	2,642,831
South West	36%	5,624,696	2,024,891
Yorkshire and the Humber	36%	5,502,967	1,981,068
West Midlands region	33%	5,934,037	1,958,232
East Midlands	40%	4,835,928	1,934,371
East of England	31%	6,236,072	1,933,182
North East	34%	2,669,941	907,780
Wales	33%	3,152,879	1,040,450
Scotland	35%	5,463,300	1,912,155
Northern Ireland	34%	1,893,667	643,847
UK	37%	66,796,807	24,769,013
Sources	Finder	Office for National Statistics	% use of BNPL in relation to population estimates