Buy Now Pay Later (BNPL) services have faced headwinds in 2025, with rising interest rates and regulatory changes challenging the growth trajectory seen in previous years.
Market Data 2025
Despite challenges, BNPL adoption continues:
- UK market size: £15.2B (up 8% YoY, down from 25% growth in 2024)
- Active users: 14.2M (approximately 25% of UK adults)
- Average transaction value: £65
- Preferred categories: Fashion (38%), Electronics (22%), Home & Garden (18%)
Regulatory Impact
The Financial Conduct Authority (FCA) has introduced stricter affordability checks, slowing approval rates. However, this has improved credit quality and reduced default rates for providers like Klarna, Clearpay, and Laybuy.
Merchant Considerations
For e-commerce merchants, BNPL remains attractive:
- Higher average order values (15-30% increase)
- Improved conversion rates (10-15% lift)
- Lower return rates (consumers more deliberate in purchases)
The sector is maturing, with consolidation expected among smaller players while established providers maintain strong growth in the UK market.