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Consumer Credit
How buy now, pay later is growing the credit market
Examining the growth in buy now, pay later and how this type of point-of-sale fi nance is reshaping the credit ecosystem
Satrajit “Satty” Saha CEO of TransUnion in the UK
www.transunion.co.uk
There’s no doubt that the pandemic has propelled digital acceleration in the credit market, alongside a shift in consumer spending habits, with buy now, pay later (BNPL) experiencing unprecedented growth. BNPL reached a total transaction value of £6.4bn in early 2021i and the latest research from our Consumer Credit 2022ii white paper – an in-depth look at the current fi nancial landscape and changing consumer habits – shows two in fi ve (37%) UK adults are now using this form of payment at least some of the time when shopping. Flexibility is key to this consumer choice,
with nearly seven in 10 consumers (68%) saying their top reason for choosing BNPL is spreading payments out over time. The appeal of interest-free payments is another major driving factor for these credit-savvy consumers – over six in 10 (62%) choose BNPL for this reason. Ease of use at checkout is also important for
more than four in 10 (41%) and is markedly most important for younger adults, with 54% of Gen Z listing this as a key reasonii.
Pioneering credit industry changes Aligning with these changing consumer habits and supporting this growing market, in February 2022, we became the fi rst UK credit reference agency to accept BNPL data into UK consumer credit reportsiii. This represents a watershed moment for the
credit industry. The use of BNPL data will support consumers using this type of point- of-sale fi nance, who will be able to better demonstrate their ability to make timely payments, and really benefi t those with thin credit fi les by displaying positive payment behaviours that will be visible to other lenders and could support wider access to credit. For lenders, the addition of the new data and insight will enable a more comprehensive picture of the consumer’s fi nancial position, helping them to make informed decisions and ensure that payment plans are aff ordable and sustainable. These changes represent a game-changing innovation in the way BNPL products are treated within the credit ecosystem. Obligations to report data to credit
reference agencies form a key part of new
Obligations to report data to credit reference agencies form a key part of new guidance being devised between TransUnion, other leading credit reference agencies and industry bodies. This builds on existing data sharing guidance to protect consumers from over-extending themselves fi nancially
guidance being devised between TransUnion, other leading credit reference agencies and industry bodies. This builds on existing data sharing guidance to protect consumers from over- extending themselves fi nancially. The HM Treasury consultation on the
regulation of this sector closed in January 2022 and, following the fi ndings of that, the Financial Conduct Authority (FCA) is likely to begin developing its own rules to regulate BNPL providers.
Supporting consumers as they navigate fi nancial challenges People need as much choice as possible when it comes to fi nding fi nance that’s right for their needs, and on terms they can aff ord. Including BNPL data in credit reports will support consumers and help lenders make informed credit decisions. It’s important to note, however, that BNPL
payment behaviour won’t have an immediate eff ect on TransUnion credit scores.
24
www.CCRMagazine.com June 2022
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