Credit Card Transactions Drop By 18%

The emergence of the BNPL sector has led to a dramatic drop in credit card transactions as consumers move away from traditional payment methods.


Expansion of BNPL Sector

Recently, Amazon announced it would stop accepting credit card payments from January and research by leading UK Buy Now Pay Later (BNPL) platform, Butter, has revealed how the emergence of the BNPL sector has already led to a decline in credit card transactions, as more and more consumers opt for this modern method of payment.

The Buy Now Pay Later space has expanded dramatically in a very short period of time. In fact, it’s estimated that the value of transactions taking place via BNPL platforms has climbed 65% during the pandemic, hitting £6.4bn in 2020 alone.

This has been driven by a user base that has almost doubled in size, climbing from 5.8 million users to 10.1 million – a 75% increase.

As a result, it’s thought that the BNPL market now accounts for 5% of all e-commerce transactions, a 2% increase in just 12 months.

But what does it mean for traditional transaction methods?


Decline for Debit & Credit Card Use

Butter’s market analysis shows that the old fashioned favourites of the debit and credit card are showing a notable decline in the face of BNPL challenger platforms.

In just one year alone, the number of debit cards in issue with UK residents has fallen by -6% to just 92,172,000. At the same time, credit cards have seen a -3% decline with just 62,948 now in issue.

While the value of purchases made immediately via the use of a debit card has climbed 3% on an annual basis, there has also been a decline in those choosing to purchase on credit.

The latest data shows that consumers purchased goods on credit to the tune of £13.9m annually, down a huge -18% on the previous year during the same time BNPL transaction values climbed 65%.

Timothy Davis, Co-Founder and CEO of Butter, commented: 

“Buy Now Pay Later is just another option open to the consumer when it comes to how they want to transact and we’re never going to see it fully replace the direct purchases made via a debit card or with cash.

However, it’s abundantly clear that the greater flexibility, transparency and accessibility it offers over purchasing with a credit card, for example, resonates with today’s consumers. So it’s no coincidence that credit card purchases have declined while the BNPL space has gone from strength to strength.

For many, credit cards are a rabbit hole of additional charges, confusing bills and uncertainty.

Today’s consumer wants to know what they’re borrowing, what it will cost them to do so and a clear picture of their repayment timeframe and the BNPL sector offers that while also allowing them to spread the cost of a purchase to suit their individual financial situation.

It also seems as though credit card costs no longer work for retailers and while Amazon has been the first to announce their removal as a route to transacting, we could see many more soon follow suit.”