This paper examines who is using Deferred Payment Credit (DPC), also known as unregulated Buy Now Pay Later, and its impact on their financial outcomes.
Read Occasional Paper 69 (PDF)
We have published this paper alongside a Consultation Paper and Cost Benefit Analysis, which look at a wider range of potential harms associated with DPC.
Summary
Deferred Payment Credit (DPC) has grown rapidly in recent years and concerns have been raised about potential consumer harm associated with its use. We used data from the UK's 4 largest DPC providers at the time of the analysis to show descriptive statistics on DPC users and estimate the causal impact of DPC credit on some consumer outcomes.
Our analysis finds DPC users are, on average, younger and less creditworthy, with higher levels of unsecured debt. They are also almost twice as likely to be in serious financial distress compared to the wider UK population.
We found some evidence that DPC borrowing modestly increases future DPC missed payments. However, we found no consistent evidence that DPC borrowing itself causes medium-term indebtedness on other credit products, nor evidence that it leads to higher rates of missed payments on other credit products or financial distress.
These findings show DPC users are more vulnerable than the wider UK population. As DPC is currently unregulated, they may need additional protections and support. However, the research also indicates that DPC borrowing may not be the main cause of widespread financial challenges.
Authors
Edwin Chan (FCA), Andrea de Mauro (FCA), Jonathan Shaw (FCA), Sam Hainsworth (FCA), Mark Mitchell (FCA), Helena Norrgren (FCA), Christopher Firth (during his time at the FCA), and Jesal D. Sheth (FCA).
Disclaimer
Occasional Papers contribute to the work of the FCA by providing rigorous research results and stimulating debate. While they may not necessarily represent the position of the FCA, they are one source of evidence that the FCA may use while discharging its functions and to inform its views. The FCA endeavours to ensure that research outputs are correct, through checks including independent referee reports, but the nature of such research and choice of research methods is a matter for the authors using their expert judgement. To the extent that Occasional Papers contain any errors or omissions, they should be attributed to the individual authors, rather than to the FCA.