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Credit Demand Grows Alongside Booming Buy Now, Pay Later Market

by Uma
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28 April 2022: Consumer demand for credit products has grown since the onset of the pandemic, according to TransUnion’s Consumer Credit 2022 white paper, which reveals changing consumer preferences and affirms the growing demand for buy now, pay later (BNPL) finance. 

The research reveals significant growth in the credit market when compared with pre-pandemic figuresi  with more consumers now intending to take out mortgages (26% versus 22%), credit cards (22% up from 13%) and unsecured personal loans (16% versus 7%) when compared with two years ago.

Also highlighted in the report is the closing gap between traditional banks and digital-only finance providers, with 21% of UK consumers planning to open a current account with a high street bank in 2022, whilst almost the same number (20%) are looking to apply with an online-only bank or app.

The rise of BNPL is examined in depth, with TransUnion’s research affirming that these products have quickly become as popular as more conventional forms of finance. BNPL finance reached a transaction value of £6.4 billion in 2021, according to industry reportsii and the growth looks likely to continue.

“Buy now, pay later finance saw unprecedented growth during the pandemic, with our research showing nearly two in five (37%) UK adults now use these services at least some of the time when shopping,” explains Satrajit “Satty” Saha, CEO at TransUnion in the UK. “Consumers are seeking alternative ways to pay as they address the cost of living crisis, and TransUnion is proud to be at the forefront of changes to support consumer needs as this sector evolves, by incorporating the data into credit reports from this summer.”

The main motivations cited by consumers for using BNPL services are to spread the cost over time (68%) and the option for interest-free payments (62%). Ease of use is also a key factor for two in five (41%) shoppers.

Shail Deep, chief product officer for TransUnion in the UK, added: “As the spiralling cost of living in the UK exacerbates financial polarisation, it’s important that consumer spending is supported with a broad range of payment solutions. Whilst more than half of consumers (54%) indicate that they are confident their financial situation will remain stable, four in 10 are still postponing any major spending due to concern over their financial future. BNPL provides flexibility and convenience, as well as the potential for interest-free credit, so it’s going to remain popular and continue to grow in the current economic climate.”

TransUnion’s Shail Deep is a keynote speaker at the AltFi Festival of Finance 2022 and discussed how TransUnion is leading the way in evolving the financial ecosystem to include BNPL data in consumer credit reports.

This will mean both consumers and lenders will be able to see applications for BNPL finance and payment performance for these transactions, helping to support responsible lending.