As the popularity of buy now, pay later (BNPL) providers surges in the build-up to a busy period of shopping with Black Friday, Cyber Monday and Christmas all on the horizon, many consumers could see themselves accumulating debt and struggling to pay it back.
As the Christmas shopping season gets underway, 58 per cent of BNPL users – equivalent to nearly 12 million Brits – also plan to use it to help fund their Christmas shopping, including during promotional shopping events Black Friday and Cyber Monday.
New research from credit reference agency Equifax UK reveals that the most common reason UK consumers turn to BNPL is to spread payments without incurring interest (27 per cent). However, 13 per cent said they would struggle to afford gifts without the help of BNPL, while 12 per cent feel pressure to buy presents for family and friends so use BNPL to cover the cost.
Meanwhile, 18 per cent said they feel more comfortable using BNPL than a credit card. As much as two-thirds of Brits have used or plan to use BNPL during this year’s Christmas season, but around 64 per cent of those will end up struggling to repay it, according to recent research from Moneyhub.
In fact, the data and payments fintech found that nearly a third (28 per cent) of credit-using Brits have fallen into collections or arrears on purchases made for Christmas.
One of the major drivers pushing people towards using BNPL during the Christmas period is a lack of savings – meaning they don’t have the money to purchase gifts outright, or can’t guarantee they’ll have funds to make repayments on time.
New research from digital bank Zopa reveals that 16 per cent of consumers have nothing in savings right now, while a further 19 per cent have less than £1,000. Among those that do save consistently, 20 per cent save no more than £50 per month.
What about a savings ‘subscription’?
To address this, Zopa found that nearly three quarters of Brits (71 per cent) would be open to ‘subscribing’ to saving money each month if it was as simple as using an e-commerce subscription with options to pause, skip, or cancel at any time.
In light of these findings, Zopa Bank has launched new updates to its auto-save tool, which helps customers automate regular transfers from their bank account to their Zopa Smart Savings Hub.
“Brits clearly have savings front of mind but struggle to form good habits,” says James Blower, head of savings at Zopa Bank. “We found that 39 per cent of people don’t know the interest rate of their savings account, another 10 per cent don’t have a savings account at all, and 62 per cent of people store most of their savings with a high street bank.
“This suggests many consumers are in the dark about their savings potential and losing out on better interest rates elsewhere. Those re-evaluating their options should consider savings options that combine a high interest rate, good service, accessibility, and tools to automate their savings with a few taps from their smartphone.”
Currently, Zopa Bank auto-save customers save an average of £208 per month. They have saved more than £40million in total with more than £1.8million in interest accrued with its help. Those customers using auto-save have funded their savings account five out of the last six months on average, compared to one in six months for those not using the tool.
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