As industry experiences growth.
The number of consumers who have used ‘buy now pay later’ has increased five-fold from 400,000 to two million in the last three years, an ASIC review has found, with $903 million in outstanding balances.
A buy now pay later arrangement allows consumers to purchase and obtain goods and services immediately but pay for that purchase over time. While some buy now pay later providers offer fixed term contracts up to 56 days for amounts up to $2,000, other providers offer a line of credit for amounts up to $30,000.
ASIC commissioner Danielle Press said, “Although our review found many consumers enjoy using buy now pay later arrangements and plan to continue using them, there are some potential risks for consumers in using these products.
“The typical buy now pay later consumer is young with 60% of buy now pay later users aged between 18 to 34 years old. We found that buy now pay later arrangements can cause some consumers to become financially overcommitted and liable to paying late fees.”
The ASIC review found that one in six users had either become overdrawn, delayed bill payments or borrowed additional money because of a buy now pay later arrangement.
“The exponential growth in this industry, along with the risks we have identified, means this will remain an area of ongoing focus for ASIC. One area we will be targeting is where consumers are paying more than they need to for using a buy now pay later arrangement,” Press said.
NRA supports service providers
The National Retail Association (NRA) is backing buy now, pay later service providers such as Afterpay, OpenPay and ZipPay, following the release of the ASIC review.
NRA Deputy CEO Lindsay Carroll said it is important for regulators and legislators to be mindful of the third party in this debate – the businesses that accept these payment facilities.
“The concept of buy now, pay later isn’t new to retailers – it’s nothing other than layby in reverse,” Carroll said.
“We are seeing an ever-increasing number of retailers accepting payment through buy now, pay later platforms as a means of offering their goods and services to a wider range of consumers – and it is delivering results.
“Because they don’t charge interest, and only charge fixed fees, most buy now, pay later services fall into an exception deliberately included in the legislation. Previously, a service falling into this category was considered too low a risk to be worth regulating.
“Throughout the ASIC report, we see these businesses working alongside the regulator to address any concerns raised, undertaking reviews of their contracts, processes and practices where a potential for consumer harm is perceived.
“We eagerly anticipate the buy now, pay later and retail sectors continuing to grow side by side, diversifying the products, markets, payment options and consumer demographics accessible to all three parties in these relationships.”