The Buy Now Pay Later (BNPL) industry is experiencing exponential growth. Since the start of 2023, over half of UK adults (approximately 26.4 million people) have embraced BNPL services, and it is predicted the UK market will surpass £37 billion by 2026. However, with heightened competition and the implementation of new regulations imposed by the Financial Conduct Authority (FCA), BNPL providers are encountering new challenges. In this blog post, we explore these challenges and discuss how technology can help pave the way to success.
Consumer challenges
BNPL is a useful method for consumers to spread the cost of a purchase and is positioned as a no interest credit option. Yet if payments are missed, providers will charge interest - in 2023 over 53% (estimated at 10.6 million people) were charged a fee for late payments, which if happens repeatedly will impact their credit scores.
The ease and accessibility to BNPL services is another benefit to consumers, who can register with multiple providers. While advantageous this has led to concerns of an increasing risk of accumulating debt, which can pose a significant threat to those already experiencing financial instability.
In response to growing concerns about irresponsible borrowing, there has been an increasing focus on the BNPL industry by regulatory bodies.
FCA Consumer Duty rules
In July 2023, the FCA introduced new Consumer Duty regulations to safeguard consumers and ensure companies communicate openly and with full transparency regarding their services. This regulatory measure marks a positive step forward in protecting vulnerable customers from escalating debt, while enabling providers with and opportunities to enhance their reputation and mitigate losses.
Emergence of new competition in the BNPL market
The popularity of BNPL amongst consumers has heightened competition, with many trusted banks and FinTechs introducing their own offering. A key player in the space is tech giant Apple who introduced Apple Pay Later to the US market in 2023. Given that 52% of UK consumers own iPhones the potential for Apple to bring this innovation to the UK presents a significant opportunity for further industry advancements.
Harnessing Technology for Success
To win in this competitive market, BNPL providers must prioritise delivering maximum value to their customers, building trust, loyalty and a good reputation. Financial Cloud solutions offer a comprehensive suite of tools to strengthen customer relationships, fuel business growth and ensure compliance with industry regulations. With Financial Cloud companies can:
- Access and manage comprehensive customer data in a single view. Gain deeper insights into your customer journeys and manage debtors without the need for costly outsourcing.
- Leverage real-time activity, interactions and customer data to send high volumes of personalised communication across a variety of channels.
- Provide multiple payment options to enable your customers to manage their repayments at their convenience.
- Manage adherence to regulations with speed and agility by creating custom-built workflows to manage internal processes and guidelines towards compliance across your entire organisation.
- Access real-time data and dashboards provide advanced reporting and rich insights to drive data-driven decisions and work towards continuous improvement.
To find out more how you can accelerate business performance, boost customer satisfactions and stay on top of industry regulations Click here to request a demo.
