The Lowdown: Finance Edition October 2021

In this special Finance Edition of The Lowdown we explore whether the buy now, pay later trend has legs, how consumer confidence is faring as winter approaches and why Cash is king for kids. Read on!

Buy Now, Pay Later Surge



As the Guardian reports, what was once a niche form of credit, buy now, pay later (BNPL) deals have exploded during the pandemic. Labelled “the future of millennial finance”, it’s proved popular amongst young adults and others with tight finances able to delay payment for the goods they purchase.


Fintech brands such as market leader Klarna are readily offering credit to consumers in return for commissions from retailers. For these retailers, the appeal of BNPL is simple: customers spend more. “It increases the basket size and it also reduces dropped baskets,” said one BNPL investor.


With predictions that consumers' spending via BNPL could surge to c. £40 billion a year by 2026, mainstream banks and lenders are set to enter this market to counter its threat to their credit card businesses. Meanwhile debt campaigners warn that BNPL could be the next payday loans-style scandal to hit the financial sector and the Financial Conduct Authority is expected to introduce greater scrutiny in late 2022.


According to Ronan Dunphy, banking analyst at stockbroker Goodbody, the regulators’ approach will help determine how large the market could get:


“BNPL clearly resonates with a large cohort of consumers, as evidenced by the rapid growth in the market. However, this growth has taken place in the absence of any regulatory constraints and in an environment where it is not always clear if consumers understand the terms of the products.”

Credit Card Spending Is Returning...

The latest UK Finance data on July 21’s card spending shows that the value of transactions is up 32% YoY (albeit flattered by a weak comparable as we came out of the first lockdown last year) and appears to be still rising back towards pre pandemic norms. Outstanding balances on credit card accounts are still contracting however (by 6.9 per cent over the twelve months to June), as repayments continue to outstrip new borrowing in the year.


Source: Card Spending Update, UK Finance - report here


...But Consumer Confidence Remains Fragile

A recent Reuter’s article was generally positive about consumer confidence, but there’s a suggestion of another potential shift in consumer behaviour:


"…this month the five-point fall in the major purchase index is counterbalanced by the five-point rise in the savings index, suggesting that consumers could be considering switching into saving rather than spending."

The data suggests that consumers may not necessarily be heading for a massive, spending splurge but are considering their savings too. As GFK’s Joe Staton noted in Marketing Week,


“There’s no doubt that Covid numbers still have the power to deliver surprises as we move forward, but marketers can expect to see the consumer mood improving as time passes. It’s a much easier road ahead now.”

Aggregate level data of course masks key nuances. Different consumer deciles are having very different economic experiences, with the top having benefitted from increased disposable income while those at the bottom face the opposite in what has been labelled a “K-shaped” recovery.


According to Reuter’s poll of economists, the British economy is still expected to grow this quarter, so thankfully someone’s continuing to spend! But with an unpredictable winter ahead, marketers still need to be smart with their media, messaging and targeting to give the right consumers good reasons to part with their money.


Source: Marketing Week: Marketers see ‘reasons to be cheerful’ as consumer confidence holds up

Covid Has Accelerated Consumers' Embrace Of Cashless Payments

A recent report from UK Finance sheds light on how the way we pay for things has shifted – particularly in the last 18 months. Cash payments have been on the decline for some years, but the pandemic has seen this accelerate with cash now only 17% of total payment volume in 2020.


Debit cards are the most popular payment method with contactless now making up 53% of those payments (something also accelerated by the pandemic). Apple Pay, Google Pay and Samsung Pay have also seen positive take up of their services.


"Nearly a third (32%, 17.3 million people) of the adult population had registered for mobile payments in 2020, an increase of 7.4 million people (75%) compared with 2019.”

However, despite a 35% fall in cash usage in 2020, maintaining access to it remains vitally important for the elderly, shoppers in rural areas and people living in poverty as well as all the businesses who continue to use cash.

Source: UK Payment Market Summary 2021, report here


“If I WANT it I buy it, if I NEED it mum buys it”, Gabriella Aged 11

Children are an audience for whom cash remains a top priority. The Beano Brain’s Million Pound Kids spending report, highlights 4 key trends around the spending habits of 7 – 14 year olds:


  • Cash is King - even when many are getting debit cards, they like to have cash on them for emergencies.

  • Multiple revenue streams – today’s savvy kid gets money not only from pocket money, but also celebrations (including birthdays), incentives and income from their own endeavours.

  • Everyday treats – kids like to treat themselves little and often versus saving up and waiting for the big ticket purchase.

  • Love the high street – in contrast to parents opting for the ease of online shopping, kids like the experience of browsing in shops.



ONS data shows that households with children have higher average weekly expenditures (£715) than those without (£531), making them a potentially valuable segment to market to. But as evidenced by fast food restaurants ranking highest amongst kids’ expenditure priorities, what’s appropriate in terms of messaging and media needs to be carefully considered.

Ad Spend Growth Outstripping That Of GDP

In his article for Mediatel, respected industry commentator Dominic Mills makes the interesting observation:


"as long as I can remember, adspend and GDP have always tracked each other within a narrow band (just over 1%), with adspend usually leading into a recession and lagging as we came out."

However, recent Advertising Association/WARC figures project adspend growth of 18% for 2021 and 7.7% for 2022 whereas, Bank of England forecasts for GDP growth projects “only” 7.25% this year and 4.5% in 2022. Why has this historical link apparently been broken?


Mills believes the change is due to several potential factors:

  1. More competition requires more adspend

  2. New categories (e.g. streaming services, Uber etc.) are investing in advertising

  3. The proliferation of channels and social media has made advertising more accessible

  4. e/m commerce – no shop windows, so more spending online

  5. Venture capitalists investing for quick growth

While surging adspend is good news for the advertising industry, it does mean that even the best laid plans are susceptible to unexpected media inflation that risks eroding the effectiveness of marketing budgets. Marketers and their agencies will need to stay alert and agile to help ensure that increased adspend really does translate into the acceleration of growth they aspire to.







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