Making one BNPL purchase per week could require over 300 payments each year

New research by TotallyMoney has investigated the different payments structures for Buy Now Pay Later (BNPL) and has found a lack of consistency and regulation is leading to millions of people struggling to manage payments.

The research found that. the average customer makes 4 BNPL transactions per month, resulting in 12 separate payments for the typical ‘pay in three’ plan.

With Payment structures varying between providers, a customer could see the same 4 purchases could generate up to 24 separate payments with another leading BNPL firm, meaning that 52 purchases could generate 312 payments in just 12 months.

A third (34.2%) of BNPL customers have difficulty in keeping track their payments, and a quarter (25.2%) lack confidence in their understanding of BNPL, whilst 22% of BNPL users missed a payment and incurred fees over a six month period.

Missed payments might not only leave a mark on an individual’s credit file, but can also result in fees charged by BNPL lenders for late payment, and people in persistent arrears may be referred to debt collectors. StepChange estimates that one in ten  BNPL borrowers are referred to debt collection agencies.

Alastair Douglas, CEO of TotallyMoney said  “In recent years, people’s finances have been put under huge amounts of pressure, meaning they’ve had to cut back on spending, dip into savings, or turn to credit to make ends meet. And with traditional providers tightening their lending, or pulling out of the market altogether, buy now pay later has, for many, helped plug the gap.

“Offering interest-free payment plans, split over a set period of weeks or months, BNPL lets customers spread the cost of a purchase without needing to pass any affordability or credit checks. And although BNPL won’t help a customer grow their credit score, missed payments can show up on credit files, impacting people’s ability to borrow in future.

“But as BNPL is designed to encourage customers to spend more, does it promote responsible use? Or, does splitting payments over a few weeks offer fair value to the 8 in 10 people being paid monthly? Managing debt repayments can be stressful enough, and it’s clear that regularly using BNPL can lead to dozens of transactions every month, making it even harder to manage. And one in three people struggle to keep track of their payments.

“BNPL users are more likely to be younger, renting, and on lower incomes, with reduced financial resilience, and making them more likely to be financially vulnerable. The government has dragged its heels on buy now pay later, having announced its intention to regulate the sector more than three years ago. But as we wait for action, perhaps they just see it as a job for after the next election, or party.”