Buy Now, Pay Later in Australia - statistics & facts
The Buy Now, Pay Later (BNPL) market has developed rapidly in Australia, with the nation a world-leader in terms of uptake. BNPL refers to the use of installment plans to pay off consumer goods over a specified time while being able to use the product immediately. The benefit to the consumer is that they get the product immediately, and if they make the repayments on time, pay little to no interest. A credit check is usually not necessary for small purchases, meaning fewer hurdles for consumers to gain access to the products they need or want. The downside for consumers is that if they cannot make the repayments in the agreed period, they can be charged late fees or interest on their BNPL loan.
Although very few BNPL companies have reported a profit, the major revenue streams include late fees paid by the consumer and transaction fees paid by the merchant. In Australia, BNPL providers charge merchants between four to seven percent to process payments, significantly higher than the one to 1.5 percent for credit cards. Nevertheless, the potential to bring in new customers is a leading motivator for offering BNPL in the country.
In 2023, the Australian Government announced that it would bring BNPL under the National Credit Laws. The move to regulate BNPL services in Australia comes after growing pressure to treat BNPL services as credit products to provide more consumer protection. Financial advisors have been vocal about the risk of unmanageable repayments and accumulation of debt. In a survey among financial advisors in Australia, the overwhelming majority agreed that BNPL services should be regulated. Indeed, the average consumer BNPL debt in Australia had increased over the past five years. For BNPL providers, the path to profitability partly relies on the fact that consumers will not be able to make all repayments. As consumers weigh up the benefits and disadvantages, the coming years will determine the viability of this payment method.
Who are the major BNPL service providers?
There are several BNPL providers in Australia. The most well-known BNPL brands include Afterpay, Zip, and Humm, with LatitudePay recently exiting the market in April 2023. While Afterpay focusses on smaller purchase values of up to a few thousand dollars, Zip and Humm allow shoppers to take out a line of credit valued in the tens of thousands of dollars if they meet certain criteria. In early 2022, Afterpay was officially acquired by U.S. digital payment giant Block, Inc (formerly Square, Inc).Although very few BNPL companies have reported a profit, the major revenue streams include late fees paid by the consumer and transaction fees paid by the merchant. In Australia, BNPL providers charge merchants between four to seven percent to process payments, significantly higher than the one to 1.5 percent for credit cards. Nevertheless, the potential to bring in new customers is a leading motivator for offering BNPL in the country.
Quick to consume, late to pay
For consumers in Australia, the appeal of having items instantly has led to a high BNPL adoption rate, and it is now a common payment method. Clothing and electronics were the leading purchase categories for users of BNPL in Australia. As BNPL has become more accessible to consumers, the products and services that can be purchased using this payment method have expanded. New entrants into the market are even offering microloans following the BNPL model for rent payments or medical treatment. Additionally, consumers can open credit lines with multiple BNPL providers, widening the scope further.In 2023, the Australian Government announced that it would bring BNPL under the National Credit Laws. The move to regulate BNPL services in Australia comes after growing pressure to treat BNPL services as credit products to provide more consumer protection. Financial advisors have been vocal about the risk of unmanageable repayments and accumulation of debt. In a survey among financial advisors in Australia, the overwhelming majority agreed that BNPL services should be regulated. Indeed, the average consumer BNPL debt in Australia had increased over the past five years. For BNPL providers, the path to profitability partly relies on the fact that consumers will not be able to make all repayments. As consumers weigh up the benefits and disadvantages, the coming years will determine the viability of this payment method.
