Ahead of the Black Friday sales and Christmas, 16 million people in the UK are still unaware you can get into debt using ‘Buy Now Pay Later’ (BNPL) services*, according to research from responsible lender, Creditspring.

A third of people (31%) still don’t think that BNPL purchases can lead to debt, however, this jumps to over half (51%) for those aged 18-24 who are a third more likely to use BNPL than the UK average.

Almost one in three (29%) of people remain unaware that BNPL is a form of borrowing, similar to using a credit card. Again, this is significantly higher for younger people, with four in ten (39%) 18-24s not unaware of the risks.

Recent figures from Adobe suggest that £3.7bn will be spent via BNPL throughout November and December (with total BNPL spend across 2023 exceeding £17bn). Research ahead of Black Friday last year suggested that BNPL was the third most popular payment option – ahead of cash**.

Recent research from TSB revealed that over four in ten (42%) of people plan to make purchases over Black Friday – with over half (56%) of those spending set to use a credit product. The research also shows BNPL spending spiked over this period last year, with Black Friday spend 77% than the 2022 average.

However, it is concerning that awareness of the risks of BNPL remains low across the board:

• Half (50%) of younger people also did not know that BNPL providers can add extra costs or late fees if payments are missed – compared to a UK average of 41%.
• Nearly half (46%) of all people were still unaware that they could be referred to a debt collector for missing a BNPL payment.
• Just 44% of people using BNPL were able to repay loans without issue with one in ten (9%) admitting that it pushed them into debt.

This misunderstanding is ultimately hurting borrowers – less than a quarter (23%) of BNPL users say they feel in control of their spending and a fifth (18%) have had to use savings to pay off debts such as BNPL purchases. 

With continued delays around the regulation of BNPL, shoppers are at increased risk due to a lack of understanding on BNPL products and a lack of transparency from providers. With BNPL payments set to spike during this busy retail period, lenders need to ensure they are protecting borrowers by ensuring that they fully understand the credit agreements they are entering and the risks from missed repayments.

Neil Kadagathur, CEO of leading subscription finance company, Creditspring, comments: “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. As we’re entering one of the most expensive periods of the year, credit plays a vital role in household spending – however, borrowers need simple, transparent and accessible products that don’t put their long-term financial security at risk. Ultimately, the onus has to be on lenders to ensure that borrowers understand the risks and support them before they rack up huge debt piles.

“Given it’s so easy to unwittingly enter a risky BNPL agreement, there will be many people who quickly end up with multiple monthly repayments after making several BNPL purchases. These regular users are the people most likely to face late fees and eventually large and unaffordable debts – as well as having a knock-on effect on their credit scores which impacts their future borrowing options. Regulation of this sector can’t come soon enough yet it doesn’t seem on the horizon anytime soon – as a first step, borrowers urgently need lenders to improve their communication and be much more transparent around the inherent risks of using credit products such as BNPL.”

Creditspring provides a new way to access credit safely. FCA-regulated, it is a credit subscription service that offers affordable, responsible credit to borrowers. Members pay a fixed membership fee every month to allow them to access two no-interest loans per year with clear repayment terms, capped costs and no hidden charges, late fees or confusing interest rates.