Undoubtedly, Buy Now Pay Later Services have changed the fintech and payments environment in Australia. A recent study by Roy Morgan found that till September 2019, over 1.95 million Australians have used at least 1 shop now pay later service, online or at stores, available in the country . A national regulator, the Australian Securities and Investments Commission (ASIC) reviewed 6 players in Australia offering BNPL service. Amongst many other findings, following are the key takeaways .
- 60% of shoppers are in the 18-34 age group
- 55% users spent more than they did before the era of BNPL
- 81% users agree that they are able to afford more expensive things through BNPL programs
- 1/3rd of users report not using or having any other credit facility
What could be analyzed from these numbers? That buy now, pay later is being adopted majorly by millennials – the consumer group born between 1981-1996. This is the consumer group that has only so much patience with rough interfaces and is cautious of credit cards. Another study found 1 in 3 Australians using BNPL programs. Millennials lead this study as well with about half of them having used a BNPL service and 90% being aware of BNPL .
For good, bad or worse, buy now pay later services are here to stay. If you want to understand what these companies are, how they work and how they are better than other credit facilities (if at all), you’ve come to the right place. Let us begin by understanding what BNPL services are.
What are buy now pay later services?
‘Buy Now, Pay Later’ is a type of payment option available at checkout of e-commerce websites and stores. It essentially indicates an interest-free credit platform that allows you to distribute the purchase cost over time instead of paying the entire amount upfront.
This service is exactly what its name suggests: You shop now and make payments in the form of periodical installments so you are not spending a huge amount of money at once. It is not just apparel that shoppers can buy using BNPL service, shoppers can buy anything and everything between flight tickets, contact lenses, a visit to the dentist and much more.
While credit cards and other traditional credit systems charge consumers interest in addition to the cost of the product, most buy now pay later companies charge the merchants a fee in one form (registration fee or fee per transaction) or the other, instead. This system helps companies close deals on consumers who love the product but can’t purchase it because of insufficient funds. It allows consumers to buy expensive products and services and pay them in installments.
How does a BNPL service work?
Just like cash, credit card, debit card or payment wallets, Buy Now Pay Later can be used as a payment method. It can be used creating an account on the service provider’s website or app, then logging in at the time of an online purchase or by displaying a purchase code through the mobile app in a store.
Another way to go about it is setting up an account for a BNPL program during the transaction process at a retailer and wait till you attain the approval for your spend from the provider. Generally, the approval is instant. Whether you can use a shop now pay later service or not will depend on whether the retailer is partnered with the BNPL service provider.
The installments to be paid would be deducted over time automatically from the bank account or card linked to your BNPL account at regular intervals. It could happen fortnightly, weekly or monthly, depending on the flexibility your BNPL operator allows you.
According to the Roy Morgan report, Afterpay and Zip (Zip Pay and Zip Money) are the market leaders in Australia and together they provide their services to over 12.3 million Aussies . Afterpay allows you to divide your shopping cart value into 4 equal instalments and pay every instalment every 2 weeks. Zip allows a more flexible repayment schedule (weekly, monthly, fortnightly). There are other BNPL platforms that allow you to select the dates of your repayments and offer a more supple repayment schedule.
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 Roy Morgan (2019) “Rapid growth in yoastuse of ‘Buy-Now-Pay-Later’ digital payments – such as Afterpay, zipPay and zipMoney” [Online] Available from: www.roymorgan.com/findings/8191-buy-now-pay-later-september-2019-201911040100 [Accessed October 2020]
 Australian Securities & Investments Commission (2018) “Review of buy now pay later arrangements” [Online] Available from: https://download.asic.gov.au/media/4957540/rep600-published-07-dec-2018.pdf [Accessed October 2020]
 RFi Group (2019) “How buy-now-pay-later success is changing the way consumers approach credit” [Online] Available from: https://www.rfigroup.com/rfi-group/news/how-buy-now-pay-later-success-changing-way-consumers-approach-credit-0 [Accessed October 2020]
 Roy Morgan (2020) “Awareness of buy-now-pay-later services Afterpay and Zip soars to over 12.3 million Australians” [Online] Available from: www.roymorgan.com/findings/8438-digital-payment-solutions-june-2020-202006090457 [Accessed October 2020]
 Bankrate (2016) “Survey: Surprisingly few millennials carry credit cards” [Online] Available from: https://www.bankrate.com/finance/consumer-index/money-pulse-0616.aspx [Accessed October 2020]
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