As the government plans to regulate buy now pay later firms by 2026, more than one in ten millennials (13%) and Gen Z (11%) consumers plan to put Christmas on credit using buy now pay later apps, RSM UK’s latest Consumer Outlook reveals. 

In addition, previous data from RSM UK shows that Gen Z (75%), millennials (70%) and families (69%) are most likely to use ‘buy now pay later’ options, as buy now pay later app downloads continue to accelerate, with monthly active users rising to 11.1% from 8.4% last year.

With use of the currently unregulated payment services growing, RSM UK is urging payment service providers and retailers to put measures in place as soon as possible to protect vulnerable customers from debt. Recent figures from Citizens Advice show the number of people seeking advice for buy now pay later debt in 2024 is already more than twice the number for the whole of 2022.

Zoe Morton, risk assurance director, RSM UK said: “Regulation of the buy now pay later industry is long overdue, so we’d urge providers not to wait, but to put measures in place as soon as possible to protect those most vulnerable customers from spiralling debt. In the current cost of living crisis, relying on credit is a worrying habit for some shoppers and with Christmas approaching, this is the right thing to do, so why wait for the regulation?”

Jacqui Baker, partner and head of retail at RSM UK, added: “We know that Gen Z, millennials and families are most likely to ‘buy now pay later’ to spread the cost as consumers navigate the impact of the cost-of-living. As it becomes a prominent payment tool for key spending, such as Christmas, retailers need to be aware of the proposed regulation to plan effectively as we could see consumers having more rights around areas such as returns for faulty goods.”

Under the new rules, the Financial Conduct Authority will be able to make customer affordability checks mandatory, and lenders will need to ensure clear and accessible information is provided, so that customers fully understand what they are signing up to ahead of any loan agreement. Any financial promotions by unauthorised merchants will also need to be approved by an authorised firm. 

RSM UK recommends providers take the following steps to prepare for the new regulation.

• Take the opportunity to feed into the government’s consultation on buy now pay later regulation before it closes on November 29th. 
• Ensure robust affordability checks are in place before customers take on new debt
• Have clear, accessible and understandable loan agreements for customers so they know exactly what they are signing up to before they take on debt.
• Alert customers to the risks and impacts of missing payments. 
• Provide adequate, accessible avenues for consumers to make contact, should they become concerned about a credit product or ability to repay. 
• Have a framework in place to support those most vulnerable customers, ensuring tailored support where necessary.