Buy now pay later (BNPL) is nothing new, however, its popularity amongst consumers and online retailers has grown rapidly over the last few years.
According to research by Power Retail, BNPL has reached a critical mass in the Australian online shopper market with in excess of 1.8 million users and a growth rate of over 120 per cent.
Managing director Grant Arnott says BNPL is a serious trend to take notice of right now.
“In a few years’ time it will no longer be an alternate payment option and will be simply expected by consumers,” he explains.
“Also, due to the recent Royal Banking Commission, some consumers have lost trust in the banks and will therefore start trusting a new generation of financial services.
“Alongside this, with the growing impact of Amazon Australia, competition in the Australian e-commerce sector has never been so fierce, and thus, success will come to those who adapt.”
The report also reveals that both shoppers and retailers agree that those consumers who use BNPL tend to spend more, buy more items, shop more frequently and are more loyal to retailers who provide it. Indeed, the majority of retailers who took on BNPL felt that it had helped conversions and increased profits. Over half felt these effects immediately.
“This research not only provides online retailers with actionable insights and strategies on BNPL methods, but it provides critical insights into how the market is transforming.”
However, ASIC has expressed its concerns about the fact that these services are not subject to the responsible lending requirements of other providers of credit and credit-like services and believes there should be more regulation.
National Retailers Association (NRA) deputy CEO Lindsay Carroll says 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,” she says.
“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.
“The buy now, pay later sector is able to exist solely because it is not subject to the clunky credit laws and has a strong incentive to act with integrity to prevent the government from regulating them,” she adds.
