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How High Street Banks May Benefit from Incoming Buy Now, Pay Later Regulation

(London, UK): Incoming FCA regulation could add restrictions on how consumers can use Buy Now, Pay Later (BNPL) services, but these changes may be welcome. According to Auriemma Group’s latest issue of Cardbeat UK, there was an 80% increase in negative experiences with BNPL plans between September 2020 and July 2021.

The increase is uniform across customer segments, including different age groups, household income, and levels of familiarity with BNPL, signalling concerns around the product itself, rather than new or unfamiliar user experiences.

“Our research shows that the few who have negative BNPL experiences most commonly attribute it to unexpected fees or issues it’s created for their other finances,” says Will Moody, Manager at Auriemma. “With a growing segment of consumers turning to BNPL options for borrowing, regulation may play a role in maintaining positive customer sentiments for the product.”

Auriemma’s latest findings show an increase in negative experiences using BNPL or instalment plans–from 5% in September 2020 to 9% in July 2021. While 9% remains the minority, it represents a large community when considering that 17 million UK consumers have used BNPL services as of November 2021.

“This sentiment is being reflected within other markets too,” says Moody. “In the US, a market where over half of adults have used a Buy Now, Pay Later service, about one-third had a negative experience. This rapid growth has caught the attention of the CFPB, and surprisingly enough, half of BNPL users in the US agree these plans should be more regulated.”

Klarna is the leading BNPL and instalments provider in the UK with 16 million customers using its products and services, but the Swedish FinTech reported a round of substantial losses in H2 2021 to add to the strain of incoming regulation.

Many of the UK’s High Street Banks and lenders already have products in market, such as NewDay with its NewPay product. Moreover, regulated FinTechs such as Monzo and Curve also joined the BNPL space in 2021, with Revolut soon to follow.

“Auriemma expects that BNPL regulation will put significant strain on compliance resources for unregulated players such as Klarna,” says Louis Stevens, Director of Roundtables. “This, in turn, could impact innovation, development and growth, opening the door for regulated lenders such as High Street Banks and credit card issuers to step in.”

Could the future of BNPL in the UK rest with traditional players integrating instalments into their existing product sets? And will this be the solution to reversing the rise in poor customer experience? Auriemma Group will continue to monitor and discuss BNPL in upcoming Cardbeat studies, and within its Customer Service Roundtable groups when they next meet June 16-17 at the Sheraton Grand in Edinburgh, Scotland. Email research@auriemma.group to learn more about our consumer studies and roundtables@auriemma.group to inquire about our forums.

Survey Methodology

These Auriemma Research studies were conducted online within the UK by an independent field service provider on behalf of Auriemma from in September 2020 and July 2021, among 80o+ adult credit cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.

About Auriemma Group

For more than 35 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Will Moody at +44 (0) 207 629 0075.

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Buy Now, Pay Later Preferred Over Credit Cards by Gen Z and Millennials

(London, UK) More credit cardholders ages 18-34 would prefer to use a Buy Now, Pay Later (BNPL) service than their existing credit card if faced with a need to borrow, according to Auriemma Group’s latest issue of Cardbeat UK.

BNPL popularity and usage has grown exponentially in the UK since Klarna launched in September 2016, accelerated by the pandemic and the resulting shift to online shopping. In these 5 years, firms such as Laybuy, Clear Pay and PayPal have entered the BNPL space, capitalising on the rising demand from consumers.

Auriemma Group’s latest research revealed a significant shift in borrowing preferences. Among credit cardholders, 20% would prefer to use a BNPL provider (e.g., Klarna) if they did not have enough funds available on hand, representing a 43% increase since November 2020. Meanwhile, the proportion of cardholders electing to borrow on their current credit card fell to 38%, representing a 17% decrease. The growing preference in using a BNPL product to borrow is largely attributable to older Gen Z and Millennial cardholders. Nearly three in ten (29%) say they would prefer to use BNPL when they do not have the funds to hand, compared to 25% who prefer using their credit card.

UK Neobanks are picking up on this trend, with Monzo and Curve announcing the launch of BNPL products last week, and Revolut expecting to follow suit. High Street banks such as Barclays have also expressed an interest to pursue a BNPL venture. But for the larger players bringing a product to market quickly is not easy, and with regulation coming from FCA by the end of 2022, time is of the essence.

“This shift in preference is leading some cardholders away from traditional credit solutions,” says Jaclyn Holmes, Director of Research at Auriemma Group. “Credit providers should evaluate their product sets to understand how they may need to adapt and differentiate in order to meet their customers’ evolving needs.”

Auriemma has seen credit card cancellations increase as consumers look to other payment and borrowing methods. 14% of credit cardholders have cancelled a card in the past 18 months, up from 8% in November 2020. And this proportion increases to 24% among those who have used a BNPL plan.

While BNPL has experienced significant growth, credit and debit are still the preferred payment choices. BNPL only captures 7% of total transactions while credit and debit capture far more (44% and 41%).  Issuers looking to meet growing consumer demand could integrate BNPL into new or existing credit card products, where there is interest from 43% of cardholders.

“As BNPL continues to grow in popularity we expect interest in credit card instalments to rise further,” says Holmes. “As we’ve seen in the US, this type of offering gives issuers a way to compete directly with BNPL providers without cannibalising their credit card portfolio.”

Survey Methodology

Cardbeat UK

This Auriemma Group study was conducted online within the UK by an independent field service provider on behalf of Auriemma in June 2021, among 800 adult credit cardholders. The number of interviews completed is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification. The average interview length was 21 minutes.

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, call Jaclyn Holmes at +44 (0) 207 629 0075.

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Buy Now, Pay Later Usage Increases as Provider Options Expand

(New York, NY) Buy Now, Pay Later plans have reinvigorated the centuries old installment payment concept, now allowing shoppers to split payments for small and large purchases alike, particularly online. Auriemma Group has been researching this space in their Payments Report study since 2018, as new providers entered the space, rolling out their own unique spin on the offering.

Buy Now, Pay Later has gained wide visibility in recent years thanks to celebrity and influencer led marketing campaigns. Providers such as American Express and Klarna enlisted everyone from Tina Fey and Snoop Dogg to more niche personalities like Celeste Barber and Trixie Mattel in expansive ad campaigns. Since this advertising push, other bank-branded solutions (like Citi Flex Plan and My Chase Plan), and offerings from FinTechs such as Affirm, PayPal, QuadPay, Afterpay, and Sezzle have entered and redefined the space.

The widening provider field has created increased awareness, opportunity, and exposure for these products. Between Q1-2019 and Q1-2021, Auriemma’s research shows a 10+ percentage point increase in debit cardholders offered a Buy Now, Pay Later plan in-store or online. And most of these consumers find the plans attractive.

“It has become common for shoppers to see a Buy Now, Pay Later option at checkout,” says Jaclyn Holmes, Director of Research at Auriemma Group. “Online, these buttons become subtle reminders for consumers, and reinforce them as a viable payment option, especially when offered at checkout for a brand they trust.”

Take rates on Buy Now, Pay Later also increased significantly over the last couple years. More than half of those offered Buy Now, Pay Later in a physical store (56%) or online (51%) say they enrolled in the option, again representing 10+ percentage point increases since Q1-2019. These increases parallel the expanding field of options available to shoppers at the point of sale.

While merchants have traditionally been the most common provider of installment plans at the point-of-sale, more recent data from Auriemma Group shows that the FinTech Buy Now, Pay Later providers offering these short-term solutions are closing the gap. However, merchants will continue to play an integral role in the adoption of these providers – over half of debit cardholders agree that being partnered with well-known or trusted retailers is paramount when it comes to feeling comfortable and secure in using the product.

“While merchant trust is playing an influential role in Buy Now, Pay Later adoption, these offerings are also impacting the merchant’s ticket size and shoppers’ likelihood to purchase with a merchant again,” says Holmes. “This shows that a positive Buy Now, Pay Later experience can create a halo effect for the brands offering them. And with Buy Now, Pay Later becoming increasingly common and recognizable, consumers may come to expect it as a payment option rather than a sweetener.”

Survey Methodology

The Payments Report

This Auriemma Group study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) in March 2021 among 800 adult debit cardholders. The number of interviews completed for both is sufficient to allow for statistical significance testing among sub-groups at the 95% confidence level ±5%, unless otherwise noted. The purpose of the research was not disclosed, nor did respondents know the criteria for qualifying. The average interview length was 19 minutes.

About Auriemma Group

For more than 35 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London. For more information, call Jaclyn Holmes at (+1) 646-454-4200.

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Issuer-Offered Installment Plans Can Work, with One Big Caveat

Issuer-offered installment plans are attractive to consumers, but many are looking for a convenient, seamless experience from sign-up thru plan management. Auriemma’s Mobile Pay Tracker conducted in-depth interviews with consumers to gain insights on their opinions and experiences with installment plans.

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Instalment Plan Interest High with Revolvers, Millennials, and Repeat Customers

UK Cardholders Lack Understanding of Instalment Plan APRs
June 18, 2020

Cardholders were asked to evaluate the truth of various statements about instalment plans, and their impact on one’s credit score. In fact, the highest levels of uncertainty were with instalment plan APRs—most UK credit cardholders don’t know how they function with instalment plan products.

UK Instalment Plan Users tend to be Repeat Customers
June 16, 2020

Those who have enrolled in an instalment plan tend to have enrolled in more than one, and often are managing multiple payment plans at any given time. Players wishing to expand their reach and footprint within the instalment lending space may see a high take rate among existing instalment users, compared to brand new customers.

Revolvers and Young Cardholders Drive Interest in Instalment Plans
June 12, 2020

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Credit Cardholders Seek Smarter Budgeting Tools and Instalment Options

(London, UK): Many cardholders are looking for ways to more thoughtfully manage their purchases and repayment. Digital tools are a potential solution, but most consumers still track their budget manually. According to Auriemma Research’s latest issue of Cardbeat UK, however, 61% of cardholders believe digital tools would be helpful when tracking spend, even though only 20% say they are currently offered such a service from their card issuer.

Promoting existing digital budgeting tools (such as Monzo’s Salary Sorter, which segments income into spending, saving and bills), or creating new ones, will likely increase engagement and build loyalty with an issuer’s cardholders. However, tools offered must keep control in cardholder’s hands to remain appealing. For example, cardholders are more likely to set up spend alerts (45% likely) instead of spend limits (37%).

“Spend alerts may have slightly broader appeal because they put the real-time choice in the customer’s hands at purchase,” says Jaclyn Holmes, Director of Auriemma Research. “While both options provide cardholders the opportunity to set up thresholds in advance, limits prevent purchase at the point of sale, while alerts simply educate and allow consumers the choice.”

Digital tools can be helpful for keeping a budget organised, but instalment plans can help with budget management in the near-term. Online and in-store point-of-sale instalment plans provide a credit alternative for cardholders who have reached their spend or credit limit, those averse to credit cards or those who simply find the product appealing. Over one-third of those offered an instalment plan have taken advantage of the offer online or in-store over the past year. The take rate increases among revolvers (47%) and recent balance transfer customers (53%).

Revolvers and balance transfer customers are more attracted to point-of-sale instalment plans, they are more likely to have enrolled in them and are more likely to consider them for a variety of purchase types compared to their counterparts. And issuers have a clear advantage over third-party providers offering instalment plans. Nearly half of revolvers and balance transfer customers are interested in post-purchase instalment plans via their most frequently used card issuer, compared to nearly one-third of cardholders overall.

“Whether at the point-of-sale or post-purchase, revolvers and balance transfer customers are the richest audience for this product,” says Holmes. “Many seek ways to help manage their payments in an organised and predictable fashion, and instalment plans provide them a complement to other products that also offer them repayment flexibility.”

Whether for holiday, furniture, electronics or everyday items, instalment plans can help cardholders budget for future purchases. Although larger purchases tend to capture the most instalment plan usage, 25% of cardholders say they would consider the product for everyday items. This increases to nearly four-in-ten revolvers and recent balance transfer customers.

“Revolvers and balance transfer customers appear to be more open to utilising a variety of products available when making purchases and paying off debt,” says Holmes. “These cardholders don’t appear to be loyal to any one product and may be choosing between products based on need rather than desire.”

Cardholders have an increasing number of options to manage their finances. Whether setting up spend limits, alerts or accepting an instalment offer at the point-of-sale or post-purchase, cardholders have more flexibility than ever to decide how they will make their payments. Issuers who cater to this desire could increase engagement with their customers, particularly those who are already carrying a balance anyway.

Survey Methodology

This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma from July-August 2019, among 806 adult credit cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Jaclyn Holmes at
+44 (0) 207 629 0075.

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Point-of-Sale Installment Plans Are Redefining What’s Affordable

(New York, NY): Shoppers purchasing a new iPhone have two choices at checkout—pay up to $1,500 up front or go on a $60 per month payment plan. It is a familiar set up for anyone who has taken out a home, auto, or student loan: Buy now; pay over time.

Similar plans are emerging in several consumer categories beyond cell phones. Networks, issuers, merchants, and marketplace lenders offer plans in-store and online for consumers who want to pay in installments. Auriemma Research’s latest issue of The Payments Report asked payment cardholders about their appetite for point-of-sale installment plans and found that consumers who exclusively use or prefer debit cards are most likely to consider using them, even for everyday items.

Installment plans have historically been used for larger purchases like furniture and household appliances. However, offers for small to mid-size purchases have increased in popularity at the point-of-sale and sometimes post-purchase, making a range of purchase types possible. Providers like Affirm, American Express, and Amazon offer consumers the option to buy now but pay over a specified period (with transparent terms and pricing). While the specifics differ slightly by provider, the core offering remains the same: a consumer doesn’t need to pay for their entire purchase at once.

This product has wide appeal but resonates most strongly for debit users. Four-in-ten would consider using an installment plan for everyday purchases like groceries and household items. The option allows them to access credit in a way that provides more control, making purchases more manageable, and ultimately more affordable.

Six-in-ten debit cardholders find point-of-sale installment plans attractive, but many have never been offered one. Only 28% of debit cardholders report being offered an installment plan in-store, while more (45%) recall being offered one online. Regardless of channel, both groups that recalled offers reacted positively. Over four-in-ten debit cardholders enrolled in at least one of their in-store (48%) or online (41%) installment plan offers at the point-of-sale. Installment plans appeal to credit cardholders, as well: Although only 17% of credit cardholders received an offer to pay for purchases in installments, 51% of those offered do enroll.

“The structure of an installment plan is very attractive to debit cardholders,” says Jaclyn Holmes, Director of Auriemma Research. “And while credit cardholders have the option of paying off their card balance at their leisure, they, too, clearly have an appetite for something a bit more concrete.”

For many, borrowing via an installment plan is less intimidating than revolving on a credit card. According to a recent issue of The Payments Report, about seven-in-ten cardholders feel installment plans are helpful in budgeting expenses and that they help alleviate the stress of making large purchases. Overall, cardholders appreciate that installment plans provide a time period to pay off the balance.

Understandably, bigger ticket items like electronics, home appliances, and furniture top the list of purchases placed on point-of-sale installment plans, but nearly one-quarter used the product to purchase clothing, and 17% for a shopping cart of items.

“Whether for purchases large or small, installment plans are redefining how consumers view affordability, particularly for those without credit cards,” says Holmes. “Some cardholders find the uncertainty and responsibility of paying back money borrowed on a credit card intimidating, whereas installment plans provide a clearer path and time frame for repayment.”

Survey Methodology

This Auriemma Research study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) in February 2019 among 800 adult debit cardholders. The number of interviews completed for both is sufficient to allow for statistical significance testing among sub-groups at the 95% confidence level ±5%, unless otherwise noted. The purpose of the research was not disclosed, nor did respondents know the criteria for qualifying. The average interview length was 25 minutes.

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London. For more information, call Jaclyn Holmes at (212) 323-7000.

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How Instalment Plans Can Alleviate Persistent Credit Card Debt

(London, UK): Consumers experiencing or on the brink of persistent debt are now covered by new rules and guidance aimed at protecting them, thanks to the Financial Conduct Authority (FCA). The FCA is calling upon issuers to identify and assist at-risk consumers and those within the cycle of persistent debt. In a policy statement released on 27 February 2018, the regulator anticipates savings up to £1.3bn a year in lowered interest charges for those in persistent debt. It would benefit issuers, however, to help at-risk consumers before they get to this point. Instalment plans can be used to discourage persistent debt and ultimately encourage healthier payment behaviours.

Instalment plans are popular among consumers who receive offers for them. New data from Auriemma shows 61% of those solicited have taken one – but a minority (38%) of credit cardholders have ever been offered an instalment plan. Regardless of whether they receive an offer, consumers like the benefits instalment plans can provide, particularly being forced to pay off their balance within a set period (58%) and reducing the stress of large purchases (54%). These motivating factors encourage big ticket purchases while also setting clear expectations for payment, a win-win for lenders who want to best serve at-risk customers and help them develop positive payment habits.

“Instalment plans give consumers a great way to manage their budgets by spreading the cost of a purchase over a series of fixed monthly payments,” says Wendy Bradley, Director at Auriemma. “They take the guesswork out of how much is owed each month. By preempting the negative experience of persistent debt with the more positive, guided experience of an instalment plan, issuers can rescue what may otherwise become a contentious customer relationship.”

 Some creative solutions in the marketplace bundle an instalment plan feature within a more traditional credit card product. And while consumers are mixed on whether they prefer the flexibility of revolving or the predictability or instalment plans, a blended product has the potential to cater to individual preferences while garnering interest from a larger pool of customers. If created, the offering would need to have an optimal user experience and be communicated simply and clearly—41% of consumers believe the terms of instalment plans are too confusing.

“Instalment plans are typically presented at the point of sale for larger purchases, but they could also be a tool for issuers to help their customers manage their existing unsecured debt,” says Bradley. “While they don’t guarantee repayment, instalment plans could help motivate consistent repayment behaviours to get customers back in good standing before they require the greater assistance the FCA’s new guidance calls for.”

 Survey Methodology

This study was conducted online within the UK by an independent field service provider on behalf of Auriemma in November-December 2017, among 500 adult credit cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, call +44 (0) 2076-290075.

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