The Australian Securities and Investments Commission (ASIC) has released a report on the buy now pay later industry, which shows that the total amount of credit extended in the sector has almost doubled over the past year.
Charting the growth and evolution of this payment system, the report found that the number of buy now pay later transactions had risen from 16.8 million in the 2017-18 financial year to 32 million the following year, representing growth of 90%.
Given the negative impact the coronavirus pandemic has had on the economy, one could expect this figure to be even higher in 2019-20.
But despite its growing popularity and usefulness for some, ASIC’s data reveals that the system isn’t working for many others.
According to the research, one in five consumers who use the arrangement miss payments, with late fee revenue for buy now pay later providers in the review totalling over $43 million, which represents year-on-year growth of 38%.
As of June 2019, there were more than 6.1 million open accounts in the buy now pay later sector, equivalent to up to 30% of the Australian population.
Elsewhere, research shows that other consumer credit products are seemingly “plateauing”, while credit card usage declined in the 2019 survey results after several years of growth.
To help protect consumers from financial harm, regulatory changes and a code of conduct are coming to the industry soon. And from October 2021, a raft of new design and distribution obligations will be implemented, which among other things will require providers to design fit-for-purpose products that meet customer needs and ensure their products are reaching the right consumers.
The ASIC review studied six buy now pay later providers - Afterpay, BrightePay, Humm, Openpay, Payright and Zip Pay - and four major financial institutions.
Two in three Aussies in an Amadeus study from earlier this year said they would prefer to layby holidays, with more than half of those polled saying they would even consider buying a higher value travel option for their entire trip if they had the option to pay in instalments or a buy now, pay later arrangement.
Does your business offer a buy now pay later option? How has it affected business?
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