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Klarna is the UK’s Top Buy Now, Pay Later Provider, But How Can Competitors Gain Market Share?

(London, UK): Klarna is the leading Buy Now, Pay Later (BNPL) provider in the UK with 13 million customers using its products and services, but the Swedish FinTech reported $1bn of losses in 2022, its largest ever, adding to the strain of incoming regulation following the UK Government’s draft legislation in February.

Despite losses, the UK giant continues to have a strong foothold in the marketplace. According to Auriemma Group’s latest issue of Cardbeat UK, 50% of BNPL users say they prefer Klarna to other BNPL brands. Clearpay comes in a distant second at 16%, with the remaining providers such as Laybuy in single digits.

Klarna and its competitors offer similar services, including 0% interest on instalment purchases, and weekly or monthly repayment plans. One of the key differentiators, however, is each provider’s portfolio of merchant partners where customers can utilise the competing services.

For example, ASOS, one of the UK’s largest online retailers with 8.9 million customers, lists Klarna and Clearpay as BNPL options at checkout, while major sports retailer JD Sports has deals with Klarna and Laybuy. So, is it really just availability at checkout that drives usage?

Auriemma Group’s research found that 31% of BNPL users have previously tried Clearpay and 12% tried Laybuy, compared to 50% who have tried Klarna. Furthermore, while 45% of BNPL users have only used one BNPL provider, a notable 36% have tried two or more, highlighting a willingness to use alternative providers even if they are not preferred. This open tendency could play to the advantage of regulated entities following February’s draft legislation.

“Though Klarna remains the top BNPL provider for the majority of cardholders, a considerable portion have tried other options,” says Jaclyn Holmes, Director of Research at Auriemma Group. “This shows that accessibility can take priority over brand loyalty, highlighting an opportunity for the competition.”

While availability at checkout plays a large role in BNPL selections, familiarity with a provider is also important. 42% credit cardholders say they would use Klarna if presented the option at checkout because of familiarity with the brand. This supersedes user experience (23%), attractive rates (15%) and customer service (10%). More generally, 34% of credit cardholders say that familiarity with the provider has the greatest influence on BNPL usage though the strength of the terms and conditions (33%) are also a notable factor.

As regulated entities like NewDay with NewPay and Zopa make headway in the space, the focus on consumer awareness will be as critical, if not more, as product strength and customer experience.

“Regulation may require changes from Klarna and others that disrupt their current customer journey, opening the door for competitors already accustomed to regulation,” says Holmes. “If new players can quickly build brand awareness and availability at the point-of-sale, we could see Klarna more readily challenged as consumers’ top choice.”

Auriemma Group will continue to monitor this space closely in upcoming Cardbeat studies and within its Customer Service Roundtable groups.

Survey Methodology

This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma in October 2022, 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 Jaclyn Holmes at +44 (0) 207 629 0075.

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Will the UK Government’s Draft Legislation on Buy Now, Pay Later Drive Growth Forecasts?

(London, UK): The growth of Buy Now, Pay Later (BNPL) services among UK consumers has been consistent since 2016 when Klarna launched its partnership with Arcadia Group, bringing its product to mainstream retail. Today, over 17 million consumers have used BNPL services, including almost half (49%) of credit cardholders according to Auriemma Group’s latest issue of Cardbeat UK.

Despite the popularity and usage of this new wave of lending, BNPL agreements remain unregulated, and unlike credit card issuers, providers are not required to be authorised by the Financial Conduct Authority (FCA). However, new draft government legislation may soon change the readiness in which consumers can access and use BNPL services in order to reduce the risk of consumer detriment.

Indeed, some consumers are already experiencing some detriment due to their BNPL plans. According to Auriemma’s latest study, 37% of credit cardholders say using BNPL has created an additional burden on their finances, while a further 26% have been unable to afford essential purchases due to outgoings on BNPL repayments. According to the Bank of England, rising credit card borrowing could perpetuate this issue further, highlighting the urgency to reform the BNPL sector.

Almost one-third of those offered BNPL at online checkout never opt to learn more about the terms and conditions, and just 10% say they almost always click to find out more information, according to Auriemma’s Cardbeat UK.

“Our research shows that very few cardholders opt to learn more about terms and conditions when offered BNPL options at checkout,” says Jaclyn Holmes, Director of Research at Auriemma Group. “When large groups of consumers with this mentality toward borrowing aren’t required to pass affordability or credit worthiness checks, there’s greater risk on many of those consumer’s finances.”

What will the legislation mean for the likes of Klarna and other unregulated firms?

If the draft legislation is passed and the FCA takes action, firms such as Klarna could be required to make significant changes to their business such as applying to be authorised by the FCA, ensuring advertisements meet regulatory requirements and integrating rules around customer credit files and credit worthiness.

Does the legislation place regulated lenders in poll position to seize market share?

Though Klarna remains the top used BNPL service in the space, a wave of new entrants (many of whom are already subject to regulations) may threaten their stronghold. Several UK banks and lenders already have BNPL products in market, such as NewDay with NewPay, NatWest and Virgin Money. Moreover, regulated FinTechs such as Monzo and Curve joined the BNPL space in 2021, with Revolut following in 2022. Zopa recently acquired Divide Buy to enter the UK market with BNPL 2.0. 

However, for card issuers, establishing an entirely new BNPL business may not be needed to meet customer demand. Auriemma’s Cardbeat UK found that 44% of cardholders would be interested in monthly instalment plans attached to their existing credit card. A further 43% said they would be likely to enrol an in-person or online credit card purchase into an instalment plan if prompted by a push notification.

“Whether it’s building a BNPL solution or adapting existing lending tools to offer instalments, technology has enabled traditional lenders to become competitive in this space,” says Holmes. “This, in turn, could shore up the certainty around acceptable business models and future growth.”

Auriemma Group will continue to monitor this space closely in upcoming Cardbeat studies and within its Customer Service Roundtable groups.

Survey Methodology

This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma in October 2022, 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 Jaclyn Holmes at +44 (0) 207 629 0075.

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ID Provisioning Set to Increase Mobile Pay Usage

(New York, NY) Mobile payments give cardholders the chance to lighten their physical wallet, but those in states like Arizona and Maryland may be able to go without a wallet altogether. In March, Apple announced that Arizona would be the first state to offer its locals the opportunity to digitally store their driver’s license or state ID in the Apple Wallet, and Maryland soon followed. But what impact, if any, will this have on mobile payment usage overall?

Auriemma Group’s latest Mobile Pay Tracker study found that ID provisioning could increase mobile payment usage notably. According to the research, 67% of mobile payment users and 20% of non-users would be interested in adding an ID to their mobile wallet. And nearly half of those interested say having an ID available in their mobile pay wallet would make them use it more. This is particularly striking among non-users, 45% of whom would begin using mobile payments as a result.

“With the addition of IDs, mobile wallets take one step closer to being a physical wallet substitute,” says Jaclyn Holmes, Director of Research at Auriemma Group. “Though we don’t anticipate mobile wallets to fully replace physical ones, this addition will make leaving home without one a greater possibility should your state provide the option.”

However, mobile payments have some work to do if they want to convert naysayers. 62% of those uninterested in adding an ID to their mobile wallet say they don’t like the idea of having all their personal information saved to one device, and 50% don’t think it would be secure. Over half of these cardholders also don’t trust mobile wallets enough to leave their physical ID at home, saying they would still carry it with them anyway.

When looking at those interested in adding their ID to a mobile wallet, however, 69% are comfortable leaving their physical ID behind. This is most prominent among younger cardholders, suggesting that over time comfort may increase.

“Mobile payments already allow consumers to add their payment cards, plane tickets, membership cards, and more,” says Holmes. “Adding IDs is the next logical step and is likely to promote mobile payment usage overall. As issuers consider their relationship to mobile payments, it would be worthwhile for them to envision a future where digital wallets are more commonplace, even if only supplemental to the physical wallet.”

Survey Methodology

Mobile Pay Tracker

This Auriemma Group study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) in July 2022 among 2,182 adult mobile pay eligible credit 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.

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Recession Concerns Spark Adjustments to Spending

(New York, NY) Jamie Dimon, CEO of JPMorgan Chase recently cautioned that the US and the world would face a recession in the next 6-9 months. And if the UK’s cost-of-living crisis is any indicator, some consumers may soon be pinching pennies to afford everyday expenses. Auriemma Group recently conducted research in both regions and found that 55% of US credit cardholders and a staggering 83% of credit cardholders in the UK say rising costs will have a negative impact on their finances in the next 12 months.

Rising food and fuel costs are already having a significant negative impact on half of US cardholders, and these consumers anticipate costs to swell further over the next year. Looking to the UK, these impacts are even greater, with about nine-in ten (88%) reporting a negative impact from rising food costs and 81% saying the same about fuel.

“We’ve been studying changes to consumer spending and borrowing behavior throughout the cost-of-living crisis in the UK and believe those shifts may be predictive of things to come on our side of the pond,” says Jaclyn Holmes, Director of Research at Auriemma Group. “Navigating these increasing costs comes at a price for many, particularly those with heavier debt loads or fixed incomes.”

According to Auriemma’s research, US cardholders are already acting in response to rising costs. Over the past 6 months 52% curbed non-essential spending, 36% sought out more sale items than usual, and 33% switched to more affordable brands.

While often opaque to cardholders, the economic outlook due to the impacts of inflation, rising interest rates, and Russia’s war with Ukraine may cause these measures to intensify. In the UK, tensions are already hitting a fever-pitch with some activists going as far as flinging tomato soup at a Van Gough painting to draw attention to the impact of fossil fuels, but also rising costs.

“These are very, very serious things which I think are likely to push the U.S. and the world — I mean, Europe is already in recession — and they’re likely to put the U.S. in some kind of recession six to nine months from now,” Dimon said.

US cardholders agree with Dimon. Auriemma’s research found that 80% believe the US will enter a recession within the next 2 years. And this belief is changing attitudes towards spending. Over nine-in-ten of those who think it is ‘very likely’ that the US will enter a recession say they have changed their spending behavior because of rising costs.

“The UK’s cost-of-living crisis has gained media attention for the better part of the year, and the US may not be far behind,” says Holmes. “Dimon’s assertion highlights the delicate state of the economy, and US consumers have already begun to feel the effects. Looking to the UK as an example, US issuers and merchants can expect some notable changes to spending over the next year.”

Survey Methodology

Cardbeat US

This Auriemma Group study was conducted online within the US by an independent field service provider on behalf of Auriemma from August-September 2022, among 80o+ 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.

Cardbeat UK

This Auriemma Group study was conducted online within the UK by an independent field service provider on behalf of Auriemma from April-May 2022, among 80o+ 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.

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Consumers More Pessimistic About Financial Health as Cost-of-Living Crisis Intensifies

(London, UK): Consumer expectations for future financial stability is worsening, with many looking to credit cards for support during the cost-of-living crisis. According to Auriemma Group’s latest issue of Cardbeat UK, 37% of cardholders believe their financial health will worsen in the next 6 months.

Gen Z and younger Millennials express greater optimism about their future financial health than their older counterparts despite increased levels of borrowing. Auriemma’s research found that 20% of cardholders are borrowing more to afford everything they need, rising to 32% among Gen Z and Millennials, and 33% of sub- and near-prime customers. The added strain of rising costs will likely cause these figures grow in the coming months.

“Since the start of the pandemic we have seen a resurgence in consumer spending on debit cards and a rise in transfers from savings to current accounts,” says Jaclyn Holmes, Director of Auriemma Research. “Today it appears rising inflation is furthering the strain on consumers, leading some to rely on their credit cards for essential spending.”

According to Auriemma’s latest findings, over 90% of credit cardholders anticipate rising costs of food, housing, fuel or energy bills to impact their personal finances negatively over the next 12 months. While energy prices were capped at £2,500 for 2 years beginning this month, some households may still see their bills double.

“At a time when all other costs are skyrocketing, the price cap will offer little comfort for many households,” says Holmes. “With more monthly outgoings attributed to energy bills, the pressure on credit card usage and borrowing will likely be even higher.”

But consumers aren’t the only ones bracing for impact. Issuers are also trying to assess how the cost-of-living crisis is currently impacting their cardholders and anticipate the enduring impact moving forward.

“Lenders have already begun seeing the operational impact of this change in customer behaviour,” says Louis Stevens, Director of Auriemma’s Industry Roundtables. “This comes at a time where regulatory initiatives, such as The Consumer Duty Act, are already taking up considerable time and resources.”

As issuers likely tighten risk criteria for customers seeking credit, some may turn to Prime and affluent customers for lower-risk lending opportunities. Auriemma Group will continue to monitor this space closely in upcoming Cardbeat studies and within its Customer Service Roundtable groups.

Survey Methodology

This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma from April-May 2022, 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 Jaclyn Holmes at +44 (0) 207 629 0075.

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How Rising Cost of Living is Impacting Spend and Borrowing Habits

(London, UK): Rising costs for fuel, energy, food shops and housing are already impacting consumers around the UK, but many believe this is only the beginning. According to Auriemma Group’s latest issue of Cardbeat UK, 73% of credit cardholders expect the rising cost of living to have a negative impact on their personal finances over the next 12 months.

Others factors will further impact consumers, including the Bank of England’s forthcoming increased interest rates. Coupled with rises in the cost of living, these elements are set to put considerable strain on some UK cardholders.

“Rate increases will create added pressure on homeowners across the UK at a time of significant financial uncertainty,” says Jaclyn Holmes, Director of Research at Auriemma. “Meanwhile the volatility of the rental market is already putting a strain on those who do not own their own home.”

The rising costs of food, energy and fuel have impacted over eight-in-ten credit cardholders, and rising housing costs have impacted about six-in-ten. Auriemma’s research found that rising housing costs were of particular impact to Millennials, who more commonly rent—a cost that has increased 9.5% on average since 2021 according to the latest HomeLet Rental Index.

“These indicators are a sign that banks and lenders must ready themselves to provide additional support to struggling customers,” says Holmes. “When rising costs become insurmountable it often leads to cardholders making spending cuts, missing payments or even becoming delinquent.”

In fact, 67% of credit cardholders agree that they are already spending less on non-essential or luxury items due to the state of their finances. And four-in-ten say they are unable to afford a holiday, a figure that increases to 57% among sub-prime and near-prime customers.

“These changes in spending habits could have an impact on the retail, entertainment and travel sectors,” says Holmes. “This could be a considerable blow after such a short period of recovery following the start of the pandemic.”

Looking ahead, the cost of living crisis will have a notable impact on consumers. Auriemma’s research shows one-fifth of cardholders are already borrowing more to afford everything they need, and as prices increase Auriemma anticipates this figure to rise. Auriemma Group will continue to monitor this space closely in upcoming Cardbeat studies and within its Card Customer Service and Complaints roundtable.

Survey Methodology

This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma in April 2022, 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 Jaclyn Holmes at +44 (0) 207 629 0075.

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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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4 Things You Need to Know About Cryptocurrency Today

(New York, NY) Bitcoin has been around for over a decade but continues to find its footing with consumers less familiar with it. Famously first used to purchase Papa John’s pizza in 2010, the cryptocurrency’s value has grown from $725 in 2015 to over $64,000 as of this writing, creating some investment winners and losers along the way. Auriemma Group’s latest issue of Mobile Pay Tracker investigated consumers’ relationship with Bitcoin and cryptocurrency in general, uncovering who knows about it, who has it, what they’re using it for, how they’d like to use it in the future, and more.

1. Lack of understanding prevents cryptocurrency ubiquity.

Cryptocurrency has captured mainstream attention since its launch, but few consumers truly understand how it works—74% say they are a cryptocurrency novice. While some may be able to speak about it generally, its unlikely your average cryptocurrency holder is explaining the blockchain to their friends. Overall, though, nearly everyone (96%) has at least heard of cryptocurrency, highlighting just how culturally significant it has become during its relatively short tenure.

“As a payments ecosystem, cryptocurrency will need to become more widely understood for it to truly flourish,” says Jaclyn Holmes, Director of Research at Auriemma Group. “But low levels of understanding may be enough for a casual investment, even if the currency is far from becoming the decentralized alternative to cash.”

2. About one-in-six consumers currently own a cryptocurrency.

Age plays a notable role in cryptocurrency ownership, with some Gen X and Baby Boomer consumers likely hesitant to use it as an investment vehicle due to its volatility. With more time to absorb the ebbs and flows of the market and more openness to emerging payment types, Gen Z and Millennial cardholders are more likely to hold cryptocurrency (25%-30%).

“Not only do younger cardholders have the advantage of time when it comes to cryptocurrency investing,” says Holmes. “The group is also generally more open to novel technologies and approaches in the payments space. We’ve seen it with mobile payments, P2P payments, contactless technology, and more.”

Still, without high levels of understanding, 57% of those who own cryptocurrency say it comprises less than one-quarter of their overall savings/investment portfolio. Though thousands of cryptocurrencies are in circulation, Bitcoin, Dogecoin, and Ethereum are the most owned among consumers (7-11%).

3. Those with cryptocurrency want more.

Looking ahead, one-quarter of consumers are interested in buying or receiving cryptocurrency in the next 12 months. This figure increases to 81% among those who currently hold cryptocurrency. Even those who used to hold cryptocurrency show increased interest (49%), which exemplifies the largely positive experience those who have ever held it have had with the product.

“While traditionally bought and sold proactively, we’ve noticed passive opportunities for cryptocurrency acquisition sprouting up across the payments space. Venmo, for example, now allows its users to redeem their funds for Bitcoin, Ethereum, Litecoin, or Bitcoin Cash,” says Holmes. “It wouldn’t be surprising if it became a common redemption option for credit card rewards programs.”

In fact, cryptocurrency as a cash back reward is of interest to one-third of consumers, while those who currently hold cryptocurrency are even more interested (75%). That isn’t to say cryptocurrency rewards will become table stakes, but they could certainly become a program sweetener, particularly for younger cardholders looking for a low-risk way to participate in the space.

4. It’s considered a long-term investment, not liquid funds.

Though cryptocurrency can sometimes appear to be a get-rich-quick scheme, the reality is that those who hold it broadly think of it as a long-term (38%), not a short-term (13%) investment. Still, knowledge remains key. Losing the errant dollar to a defunct cryptocurrency may not change one’s financial future, but an overzealous investor could lose a lot of money quickly, like this Shanghai investor who purchased Squid Game crypto.

“Some consumers simply play around with cryptocurrency to see what happens, but this could become a high-risk endeavor for those offering up their life savings,” says Holmes. “Issuers can play in this space by offering their cardholders the opportunity to buy into cryptocurrency without such a large price tag—using rewards points to purchase smaller portions of trusted cryptocurrency providers.”

Without the infrastructure to accept cryptocurrency as a form of payment at the point-of-sale, it will largely be seen as an investment product. Few (14%) see cryptocurrency as liquid funds for purchases, but if presented with the option to use theirs for a purchase at the point-of-sale, about half are likely.

Why should banks care about cryptocurrency?

While cryptocurrency is still relatively new and transaction volume remains low for the industry, it is undoubtedly a growing space. Those looking to play in the space will need to remain conscious of evolving regulation to ensure compliance needs are met. Still, banks and issuers can act as a refuge for consumers looking to dip their toe in without the exposure that comes with committing their hard-earned dollars to the investment. Providing cardholders the option to earn or redeem their account rewards as cryptocurrency allows them to passively participate in the space in a way that feels lower-risk, particularly for those new and just looking to play around.

Survey Methodology

Mobile Pay Tracker

This Auriemma Group study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) in July 2021 among 2,003 adult mobile pay eligible credit 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.

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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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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