Gen Z, retail finance and BNPL – meeting new expectations

Generation Z, born between the mid-1990s and early 2010s, is reshaping the retail finance landscape. Raised in a digital world, this generation values convenience, flexibility and transparency in their financial dealings.

As traditional credit models evolve, new payment solutions have emerged to meet these expectations, with buy now, pay later (BNPL) being just one of several options that have grown rapidly in popularity.

The digital-first financial mindset

Gen Z’s approach to spending is deeply shaped by technology. Accustomed to instant access and frictionless online experiences, they naturally gravitate towards financial services that are quick, user-friendly and mobile-led. BNPL, with its fast approvals and clear instalment plans, is perfectly aligned with this need for convenience and control.

But it’s not just BNPL that appeals. Many Gen Z consumers also see the value in other forms of retail finance, such as interest-free credit or longer-term payment plans, which help them spread the cost of bigger purchases in a manageable way. 

Recent studies suggest around 32% of Gen Z consumers in the UK have used BNPL, often for purchases in fashion, electronics and health & beauty. This highlights how important it is for retailers to offer flexible finance options - and to ensure customers have choice at checkout.

Novuna Consumer Finance’s own research, drawn from over 70,000 customers surveyed in the last 12 months, found that an overwhelming 75% of under-25s said they wouldn’t have gone ahead with their purchase without access to finance. This shows how embedded finance is not just a convenience - for many younger shoppers, it’s a dealbreaker.

What's more, 45% of under-25s said finance availability increased their overall spend, suggesting it’s not only a tool for conversion but also a lever for upsell.

Beyond BNPL

While short term BNPL grabs many of the headlines, other finance solutions play a vital role in supporting shoppers and driving sales. These include:

• Interest-free credit: Ideal for larger items, this lets customers spread costs over several months without paying interest, helping them plan their finances with confidence.
• Interest-bearing loans: For high-value purchases or longer repayment periods, structured loans with transparent terms give customers clarity over their commitments.
• Traditional BNPL: A regulated finance product that lets customers spread the cost of higher-value purchases, often with no payments for up to 12 months. If the balance is cleared within this period, no interest is charged.

By offering a mix of options, retailers can give customers the flexibility to choose what best suits their circumstances, increasing the likelihood of conversion and fostering long-term loyalty.

Changing regulations

As short term BNPL continues to grow, regulators in the UK have stepped up plans to bring these services under stricter oversight. The Financial Conduct Authority (FCA) has been working on new rules to ensure greater transparency and protect consumers from taking on unaffordable debt. Proposed changes include stronger affordability checks, clearer information on repayments, and requirements to handle complaints just like other regulated credit products.

For Gen Z consumers - many of whom are still building their financial literacy - this is a positive step, offering better protection and more confidence in using BNPL responsibly.

For retailers, it means partnering with finance providers who don’t just understand the regulatory landscape, they already operate within it. At Novuna Consumer Finance, our BNPL product has always been regulated, and we’ve built responsible lending into every step of the process. We carry out affordability checks on each customer, protecting not only the consumer but also the retailer and ourselves.

With over 40 years of experience in regulated finance, we’re well-versed in staying ahead of changing requirements. Our retail partners can rely on us to deliver compliant, transparent finance solutions without compromising the customer experience - ensuring a seamless journey from checkout to final payment.

Adapting retail finance to evolving expectations

As Gen Z continues to shape shopping trends, retailers need to remain agile. A strong focus on transparency, flexibility and digital-first convenience will be key to building trust and standing out in a competitive market. Offering a range of finance options, from BNPL and interest-free credit to traditional loans, ensures retailers can meet diverse customer needs and preferences. Here’s how retailers can stay ahead of Gen Z expectations:

• Embrace mobile-first journeys: Gen Z expect fast, intuitive mobile experiences - from browsing and personalisation to checkout and payment. Optimise every touchpoint for mobile use.
• Offer choice at checkout: Provide a range of flexible payment options such as BNPL, so customers can choose what suits their lifestyle and budget.
• Be radically transparent: Clearly communicate repayment terms, interest rates and any applicable fees. Gen Z value honesty and will reward clarity with loyalty.
• Integrate finance seamlessly: Finance should feel like a natural part of the purchase journey, not a bolt-on. Work with partners who can offer embedded, real-time approvals and slick integration.
• Stay socially and ethically aware: Many Gen Z shoppers care about the values behind the brands they buy from. Offering responsible finance through a regulated, ethical provider can help reinforce trust.

At Novuna, we’re committed to helping retailers navigate this dynamic landscape with finance solutions designed to keep pace with consumer expectations and regulatory developments. By understanding what matters most to Gen Z, businesses can adapt with confidence and build sustainable growth well into the future.

If you’d like to explore how our tailored retail finance solutions can support your business and meet the changing expectations of Gen Z, book a call with us today.