UK transactions on Buy Now Pay Later (BNPL) providers have increased fourfold year-on-year to £2.7bn. The consumer credit model surged during the pandemic, catalysed by easy-function apps and clever marketing campaigns, with consumers taking advantage of BNPL’s short-term, interest-free credit solutions.
However, the sudden growth of the BNPL industry has caused some concerns from regulatory bodies and public organisations. These challenges arise over the standard of credit checks, the ability to accrue large debt at various providers, and a general lack of public knowledge regarding BNPL systems.
The UK Government has opened a consultation into BNPL regulation which will close in January 2022. The consultation was launched following advice from the Financial Conduct Authority, which called for ‘urgent intervention’ into BNPL earlier this year.
Like any emerging product, poor product knowledge is expected, but where finance is concerned a lack of consumer understanding is detrimental to both brand and user. So how can BNPL providers ensure there is greater consumer awareness?
Working with regulators
Reacting to the probe, BNPL leader Klarna declared BNPL scrutiny gives the industry the chance to ‘drive consistency’. By agreeing with the government over the need for a review, brands like Klarna utilised reactive PR activities to acknowledge their responsibilities within the B2C finance sector. Brands need to publicly position themselves as consumer-first, gaining trust by advocating for the standardisation of BNPL and improving financial education.
Evolve the education
Besides publicly agreeing with the review, BNPL providers should go further by issuing information to promote safer and more responsible use of their products. Be it a whitepaper detailing the rise and future of BNPL, or expert opinion articles discussing how to use BNPL credit for greater consumer benefit, brands can use proactive reputation strategies to better educate the public on their emerging technology.
BNPL giant Zilch does this particularly well. Publicly sharing the success of their journey means the consumer acquires more brand knowledge and familiarity, consequently boosting confidence to use the product and closing the knowledge gap.
From unknown to trustworthy
BNPL is set to become an integral part of the retail credit landscape. With companies like Klarna becoming household names, BNPL providers need to ensure they are also taking an active approach by engaging with the public and promoting general knowledge of their products and services. Government consultations like the one currently underway in the UK will no doubt lead to more scrutiny about these new retail credit models. However, there is also a bigger story to tell here.
The future of BNPL
The UK BNPL sector’s value is forecast to hit £27bn by 2024. With 20,000 merchants offering BNPL methods at their checkout, and more 18-24-year-olds using BNPL methods over credit cards, the generational and mass consumer market appeal will ensure BNPL’s continual growth. Further adoption for businesses is evidenced, data suggests 57% of businesses saw an uptick in basket conversions after BNPL adoption while 76% state the credit option will be key to their growth in 2022.
For consumers, further standardisation and transparency from providers may attract older demographics if the industry perception can retain its consumer-first positioning in light of the January review. Either way, it makes sense for BNPL providers to start looking at their branding and strategic positioning as the next wave of consumer credit innovation.
A hard-hitting strategic communications strategy can play a key role in driving consumer awareness for your company’s offering, get in touch today to find out what a bespoke strategy could look like for your business.