BNPL created 100,000 jobs in 2021, says report fending off regulation

BNPL created 100,000 jobs in 2021, says report fending off regulation

The report found consumers saved $102 million in interest payments last year by using buy now, pay later instead of credit cards, while 48 per cent of buy now, pay later users do not have a credit card. The net benefit to consumers after deducting buy now, pay later account fees and late fees was $68 million.

However, with consumer groups still concerned about the impact of buy now, pay later on vulnerable customers, the report points to some signs of industry stress.

For example, one in 14 buy now, pay later users have cut back on essentials to make repayments, while 22 per cent of customers used a credit card to make repayments. Of these, 9 per cent said they always carried an interest balance through to the next month.

Furthermore, 18 per cent of users have missed a repayment – which typically triggers a late fee – similar to the 17 per cent who are late repaying on a credit card.

Review of regulations

Consumer groups and the Australian Securities and Investments Commission have argued that buy now, pay later causes people to go without essentials to make repayments. The new report confirms this, finding 4.4 per cent of users went without “essentials”, while 7.3 per cent were forced to cut back.

After the federal election on May 21, consumer groups called for an independent inquiry to determine the form of regulation for BNPL, after Mr Jones said BNPL should be considered credit – but may not require the same level of regulation as credit cards.

Britain is also considering tougher buy now, pay later regulation under a review being conducted by the Financial Conduct Authority.

The industry will use this latest study to ensure policymakers consider benefits to retailers and small businesses, not just consumer impacts.

Buy now, pay later is accepted by more than 135,000 Australian retailers; the average increase in revenue for a small and medium-sized enterprise accepting the option was $18,576, the study found, while 60 per cent of retailers said revenue would fall if they stopped accepting it.

Afterpay commissioned economic research from AlphaBeta in 2018 that showed the popularity of BNPL with Millennials, while Accenture pointed to similar economic benefits to retailers in 2020. Those reports were prepared by economist Andrew Charlton, who is now a Labor member of parliament.

The new AFIA report contains an analysis of complaints. It finds 0.01 per cent of active buy now, pay later accounts were subject to external dispute resolution: 767 complaints in 2021, from 5.9 million active accounts. This compares to 0.08 per cent for credit cards.

The complaints mostly related to decisions by providers to limit access and put controls on account usage, providers said. Just 0.34 per cent of active buy now, pay later accounts are under hardship arrangements.

Despite the economic contribution, overall buy now, pay later transactions remain tiny compared to other forms of payments – just 0.48 per cent of Australian transactions by volume, and just 0.08 per cent by value. The average transaction is for $151.

Read More

Write a comment

Your email address will not be published. All fields are required