BNPL users undeterred by data on consumer credit reports
Buy-now-pay-later (BNPL) data is now appearing on an increasing number of credit reports but the change hasn’t discouraged consumers from spending.
That’s according to TransUnion, a credit reference agency, which started to put BNPL data into credit reports last year and has seen no change in spending via BNPL since the change. Indeed 38 per cent of UK adults use BNPL when shopping online which is consistent with data from the previous year.
The firm’s research found that 53 per cent of people who used BNPL in the last year spent a total of between £100 and £499 over the year. Clothing comprised 53 per cent of BNPL spending, followed by consumer tech (33 per cent) and furniture and furnishings (27 per cent).
Read more: Crackdown on buy-now-pay-later market
“This steady picture shows how established BNPL has become as part of the consumer wallet when it comes to methods of payment,” said Andy Piggott, director of core credit at TransUnion in the UK.
“The key drivers are cited as the ability to spread the cost over a period of time and the appeal of interest-free payments. This mirrors what we saw in our previous research and points to the important role that these providers are playing in giving consumers an even greater range of choice in their financial decisions.
“Having started to introduce this data into consumer credit reports last year, we’re pleased to note consumer habits have not been impacted, as this is really beneficial for both lenders and consumers in helping to create an even more holistic view of an individual’s financial circumstances.”
Read more: Low cost of credit will drive BNPL boom
TransUnion now incorporates over 130 BNPL ‘data attributes’ in its reports, to help lenders make informed lending decisions. TransUnion’s BNPL data includes the number of BNPL arrangements held by a consumer as well as total balances, repayment history and searches. The extra data may help some consumers improve their credit scores if banks and other providers can see that a consumer is making their BNPL payments on time.
Read more: Can P2P lenders leverage success in the growing BNPL market?
That said, BNPL can be dangerous for consumers. If they do not make a payment on time, they may be hit by late payment charges or high interest rates. And by postponing the date when payment is required, BNPL may encourage some consumers to spend more than they can really afford.
In February, it emerged that former P2P lender-turned-digital-bank Zopa was acquiring BNPL provider DivideBuy, which it expects to increase its revenue by at least 20 per cent over the next few years.
