Buy now, pay later, products should see an increase before Christmas
More than half of Australians said in a recent survey that they plan to use Buy Now, Pay Later (BNPL) services during the holiday season, against a backdrop of use and review meticulous. – and before a government crackdown in the New Year.
The recently released poll found that 55% of those polled said they plan to use a BNPL service to cover expenses before Christmas, according to Credit Savvy, a credit rating startup. supported by Commonwealth Bank Venture Capital Fund.
2021 saw an explosion in the use of BNPL services in Australia – although the industry is still eclipsed by traditional credit services, with local digital payment companies Afterpay and Zip dominating the local market.
About 14% of Australian adults had made a purchase using a BNPL service in the past four weeks in June of this year – up from 11% during the same period in 2020, and about $ 10 billion a year flows through local platforms.
Research also showed that a whopping 76% of those surveyed had used a BNPL service in the past 12 months, with 43% citing the service as “a way to budget.”
Paul Nicolo, chief executive of Credit Savvy, said the survey results reinforced broader research that shows the majority of BNPL clients are millennials and millennials who use the platforms to “Convenience and budgeting”.
Nicolo said his research supports a broader critique of the industry model, which claims its service is uninspiring but catches customers with the accumulation of late fees.
“There can be costs associated with managing accounts, late fees and other charges that can add up quickly,” he said.
While the industry is currently self-regulated by a code developed in February this year, companies currently do not fall under the Payment Systems Regulation Act as designated payment systems.
Earlier this month, Financial Counseling Australia (FCA) called for a review of the credit law as it relates to BNPL companies following the release of its own report which found that many users were ” over-committed ”towards BNPL products.
The number of clients with BNPL debt has exploded over the past year, the organization said, with 61% of its advisers saying clients with BNPL debt are struggling to pay other living expenses, including including bills and rent.
Similar research conducted in 2020 by the Australian Securities and Investments Commission (ASIC) found that about one in five BNPL users chose to pay off their BNPL balances before directly purchasing essentials like food.
Nicolo said the survey suggested more reckless spending habits typically associated with credit cards extended to BNPL services during the holiday season.
The survey found that 77% of those polled said BNPL would be the only form of credit they would use over the holiday season, with 21% saying they would use the service for essential errands during the holiday season. the period.
“Buy now, pay later could also affect your credit score if the supplier performs a credit check when you sign up, or if you miss your payments,” he said, adding that “despite the convenience, this may not be the right option for those looking to build a good credit report.
While the majority of survey respondents said they had never received a fee or late fee, 29% said they had received a fee, with 77% saying it amounted to $ 55 or less.
The momentum towards a regulatory overhaul of digital payments has gradually increased this year; As early as April, Commonwealth Bank CEO Matt Comyn told a parliamentary committee that the government should force BNPL platforms to perform credit checks that would provide greater transparency on customer debt, among other frameworks to protect correctly their customers.
Last week, Treasurer Josh Frydenberg announced plans to revise the rules for BNPL providers, as well as cryptocurrencies and digital wallets, which also currently operate largely outside of government regulation.
Based on the findings of the recent Treasury Payments System Review, the government said it would abandon a one-size-fits-all approach to the law and consult with Australia’s main buyer who will now pay players later next year to develop a better system.