Retailers see BNPL spike amid rising cost pressures

Interest rates push consumers towards Buy Now, Pay Later

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Shoppers increasingly turned to "alternative" ways to pay in 2024, such as buy now pay later methods, according to the British Retail Consortium (BRC).

Its annual payments report found that alternative payments, which include buy now pay later (BNPL) schemes, accounted for 3.8% of transactions in 2023, rising to 4.1% in 2024.

The report suggested that interest rates charged on credit cards could be pushing some consumers towards other payment methods "as retailers offer more payment choices and short-term interest-free credit options at point of sale".

As a percentage of total turnover or sales, alternative payments grew to 5.0% in 2024, up from 3.2% in 2023.

The average transaction value for alternative payments also increased significantly, rising from £19.57 in 2023 to £37.55 in 2024.

Alternative payment types covered in the report also include cheques, store cards, gift vouchers and platforms such as PayPal.

A report from banking and finance body UK Finance recently found that BNPL services saw notable growth last year, with one in four (25%) UK adults using them, up from 14% the year before.

BNPL can be a convenient way for some shoppers to split payments without paying interest, but concerns have been raised about some BNPL borrowers potentially overstretching themselves financially and incurring charges for loans they cannot afford to pay back on time.