6.7 million young people (aged 18-34) across the UK don’t know that using buy now, pay later (BNPL) can lead to debt. That is according to research from Creditspring.
46% of young people remain unaware that BNPL can lead to debt. BNPL is the second most common form of borrowing after credit cards amongst young people in the UK, with 15% of people using BNPL since August 2023 compared to 19% using credit cards.
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Despite 36% of young people using BNPL at least once a month, just a fifth know that these products remain unregulated. The lack of understanding about the risks of BNPL among young people is even more concerning given they are the most regular users of these products.
Almost half of young people are also unaware that BNPL lenders can add fees for missed payments, with the same proportion unaware they could also be referred to a debt collector.
32% of young people don’t realise that BNPL is a form of borrowing, similar to a credit card, whilst don’t know that they can’t complain to the Financial Ombudsman about an issue with BNPL as it remains unregulated.
The UK is sitting on a ticking BNPL timebomb
Young people are also struggling to repay their BNPL debts. Less than four in ten 18-34 year olds can repay without issue compared to 60% of 35-54 year olds.
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By GlobalDataNeil Kadagathur, CEO and Co-Founder of Creditspring, commented: “The UK is sitting on a ticking BNPL timebomb, millions of young people are unknowingly putting their financial future at risk by piling up BNPL debt.
“There is a huge knowledge gap when it comes to BNPL, this is driven by lenders who continue to offer a lack of transparency, confusing repayment terms and hidden costs. BNPL lenders need to step up and take responsibility for tackling the misconceptions that still exist about the risks of using these products.
“Regulation of BNPL is absolutely essential, and can’t come soon enough. Plans to bring the BNPL market to heel have been delayed for far too long, which has led to increased confusion and ultimately punished borrowers. The regulator needs to push through this much-needed legislation as a priority.”
