Gen Z spends a fifth of their disposable income on ‘Buy now, pay later’ refunds


Gen Z is disproportionately impacted by buy now, pay later (BNPL) products and end up spending a fifth of their disposable income on refunds.

More than a quarter (29%) of young adults worry about their ability to repay what they have borrowed, and 8% have even been contacted by debt collectors.

According to a survey of 2,000 UK consumers who have used BNPL products, a further 44% feel overwhelmed with their refunds.

It also emerged that 12% of BNPL users aged 18-24 had their credit score affected, and half regretted using the unregulated BNPL.

A separate poll of 2,000 parents of adult children also found that 66% feared they would use BNPL, and more than three-quarters (77%) backed calls for stricter regulation of the sector.

And among parents whose adult children have ever used BNPL, more than a fifth (22%) had to bail them out.

The new BNPL schemes are not regulated in the same way as traditional credit agreements

Antony Stephen, CEO of Barclays Partner Finance, which commissioned the research, said: “Rising inflation and energy bills are contributing to the growing cost of living crisis.

“This makes it much more difficult for consumers, especially those in financially vulnerable groups, to control their spending, and many are drawn to BNPL as a way to maintain their current lifestyle.

“As things stand, new BNPL products are not subject to the same regulations as more traditional credit agreements.

“With many providers, consumers don’t even receive a detailed affordability assessment, and credit reference agencies have no visibility into loans made.

“This is a problem because it allows consumers to get into unmanageable and crushing debt – a problem that our research shows hits Gen Z shoppers especially hard.”

The research found that nearly seven in ten (68%) users aged 18-24 of unregulated BNPL products have accumulated debt with multiple providers simultaneously.

And 59% of them had agreements in place with three or more suppliers at the same time.

Nearly one in ten have even been contacted by debt collectors
Nearly one in ten have even been contacted by debt collectors

BNPL’s unregulated providers are not required to report loans to credit reference agencies, which means that these multiple BNPL loans are currently not visible to other credit providers for consideration in their accounts. own affordability assessments.

This can result in additional credit being extended to a consumer already struggling with debt, compounding the problem.

Debt charity StepChange has expressed concerns about the BNPL’s impact on young consumers and echoes the call for stronger and more consistent regulation.

Richard Lane, director of external affairs at the charity, said: ‘All credit carries an inherent risk of indebtedness for consumers, but on regulated credit these risks are mitigated by strict advertising rules, affordability assessment and fair treatment of customers.

“At present, despite the benefits that BNPL can offer, the sector still remains outside these rules, which increases the risk of harm to consumers.

“It is particularly concerning that young people with less financial experience to draw on are becoming such widespread users of unregulated credit.”


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