New research from the Financial Conduct Authority (FCA) has shown that the number of people using Buy Now, Pay Later (BNPL) services has increased significantly in recent years.

According to the regulator, around 14 million people, or 27 per cent of UK adults had used a BNPL service at least once in the six months prior to January 2023. This figure was up from the 17 per cent of Brits who said they had used in in the 12-month period to May 2022.

The news comes as the FCA secures further changes to potentially unfair and unclear contract terms for unregulated BNPL firms.

The financial watchdog’s research also found that frequent users of BNPL are more likely to be in financial difficulty. It said that consumers who have used BNPL more than 10 times are over twice as likely to have a high-cost credit product, almost twice as likely to have increased the amount of debit on credit products over the last year, and over four times as likely to have missed a payment of a bill or credit commitment in three of the past six months.

The FCA said that it does not have regulatory oversight over BNPL products, but it is determined to protect consumers using financial services where it can.

The organisation added that it was concerned that customers at PayPal and QVC were at risk of harm due to how some of the contract terms were drafted. Both firms have now voluntarily made their continuous payment authority terms easier to understand, the FCA said.

“Our research shows a significant increase in the use of BNPL over the past year,” said Sheldon Mills, executive director of consumers and competition at the FCA. “When used appropriately, the product provides valuable benefits, but we want to ensure that consumers, particularly those in vulnerable circumstances, have adequate protections and are given sufficient information.”

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