The Retailer Spring Edition 2023

THE RETAILER

16

GROWTH OF BUY NOW PAY LATER

Jarred Erceg Director, Financial Services Restructuring & Insolvency Grant Thornton

T he Buy Now Pay Later 25% a year between 2022-2028, against a backdrop of sharp increases in the cost of liv ing. Jarred Erceg explains what this means for retailers. We're seeing new entrants to the market all the time, including Apple announcing in March 2023 that their BNPL product will be integrated with Apple Pay, increasing competition among existing market leaders such as Klarna, PayPal, Laybuy, and Clearpay. According to research from Bain & Co, while there's significant usage of BNPL among most age groups, it's more popular with Gen-Z and millenials. BNPL is used by people across all demographics, typically for purchases under £100, although the cost-of-living crisis means it's being increasingly used for ‘necessity’ items. (BNPL) sector is forecast to grow approximately

How do retailers benefit from BNPL? BNPL products generally don't carry interest, but BNPL providers charge retail merchants a fee. Some, but not all, charge late fees to the customer. Importantly, the customer relation ship is owned by the BNPL provider, rather than the retailer. A BNPL offering is now a key part of many retailers growth plan, bringing various benefits, including: • being paid in full at the point of purchase, with credit and fraud risk passed on to the BNPL provider • increasing the affordability of the retail ers’ products by spreading the payment over installments • attracting new customers by offering flexible payment options and leveraging a BNPL provider’s customer base to drive website traffic • customer loyalty, particularly when they have a positive experience with BNPL

FCA regulation on the horizon

Following the Woolard Review in 2021 and subsequent FCA consultation in 2022, BNPL is due to come within the regulatory perimeter, although final rules aren't expected until 2025. In the interim, the FCA has proposed that rules on creditworthiness assessments and how to treat customers in financial difficulty should be introduced, and customer complaints should be referred to the Financial Ombudsman Service. BNPL firms will also need to develop workable solutions with credit reference agencies, allow ing a consumer’s BNPL debt to be viewed by other credit providers as part of their required affordability assessments.

in the market.” ‘‘

BNPL is here to stay. But retailers should be cognisant of challenges