Buy-now-pay-later (BNPL) growth is outpacing other consumer credit options, a new analysis has found.
According to data from the Bank of England, net consumer credit increased by 5.7 per cent in the 12 months to April 2022. However, BNPL figures were not included in this.
Industry experts have predicted that BNPL volumes will surpass £20bn by the end of this year, representing a 52 per cent increase from 2021.
In 2020, the Financial Conduct Authority estimated that the BNPL industry was worth just £2.7bn.
Broker Freedom Finance has used these figures to suggest that the growth of embedded finance solutions is rapidly outpacing traditional consumer lending options, even though BNPL still remains a small proportion of the total outstanding consumer credit in the UK.
“There is a clear behavioural shift being driven by the growth in online shopping and increasing trust in digital lending,” said Michael Davidson, chief revenue officer at Freedom Finance.
“That is why the industry and regulator are reacting to the rise in this type of lending, as consumer demand accelerates innovation in the embedded finance sector.
“While BNPL is clearly the most well known product, embedded finance has many more credit opportunities – that retail and other sectors are beginning to take advantage of – as credit and financial services are integrated into a broad range of online users experiences.
“Many retailers and businesses in other sectors are rapidly expanding the range of embedded credit options they can provide to help their customers with genuine lifestyle finance needs.”
However, Davidson warned that there is a danger that the focus of BNPL as part of the recent embedded finance movement combined with a cost-of-living squeeze could leave other viable credit options in the shadows .
“Product choice in this space is essential to ensure customers get the right credit for their needs rather than the quickest, easiest option that may not necessarily be the best,” he added.