Buy now pay later (BNPL) is now bigger than ever, with one of the world’s biggest e-commerce retailers signing up its first BNPL offering for customers on its local retail website.
Zip’s buy now pay later service, Zip Pay, and its line of credit product, Zip Money, are now live on Amazon’s local website as payment options.
The partnership is a reflection of the huge popularity of this payment method. Around 1.95 million Australians have used a buy now pay later platform such as Zip Pay, Zip Money or Afterpay in the year to September 2019 up from 1.38 million, according to the latest research from Roy Morgan.
Roy Morgan chief executive Michele Levine says: “The payment environment in Australia is facing rapid change and these buy now pay later companies are likely to pose a threat to traditional deferred payment options including credit cards, as consumers can easily access a small amount of credit instantly.”
Larry Diamond, chief executive of Zip says: “We are thrilled to have secured this strategic agreement with Amazon Australia, providing customers with a more flexible way to pay. This agreement puts Zip firmly on the main stage by allowing customers shopping on Amazon.com.au to use Zip to pay at their pace.”
Mozo’s latest survey of BNPL reveals nearly half of respondents saying they’ve stopped using their credit card in favour of a BNPL service.
Mozo director Kirsty Lamont says: “Buy now pay later has changed the face of the way we pay for goods with more than 25 per cent of users cancelling their credit card and a further 23 per cent saying they no longer use it.”
The number of credit card accounts in Australia peaked in May 2017 at over 16.7 million and has fallen to 15.7 million. This may be attributed to the increase in the number of consumers using buy now pay later arrangements.
The Roy Morgan research says: “The decline in credit card usage over the last year fits into the long-term trends which show there’s been a reduction in real terms in credit card debt over the last decade down to $7 billion today compared to $8 billion in 2007.”
Australian Securities and Investments Commission’s (ASIC) latest report on buy now pay later says that consumer protections under the National Consumer Credit Protection Act (National Credit Act) do not apply to buy now pay later arrangements.
As a result, Roy Morgan says this had led to calls for greater scrutiny from both the banking sector and consumer group. A Senate enquiry earlier this year led to new obligations for providers and an increase in ASIC’s ability to intervene in the future.
Lamont says: “The ease and convenience of opting for bite size scheduled payments has certainly taken Australia by storm, but the pitfall is that it’s incredibly easy to bite off more than you can chew, and miss a payment.”
ASIC noted that because they are not subject to the responsible lending obligations, buy now pay later operators are not required to consider the income or existing debts of customers.
There is the risk is that the operators can offer finance to consumers who cannot afford to repay; and that a consumer who is in default can still get credit from another provider.
The report found that 22 per cent of users had to be more careful with their spending as a result of using the platforms.
Of this group, 8 per cent of respondents became overdrawn, 7 percent had to delay paying essential bills, 5 per cent had to borrow money from family or friends, 2 per cent had to get a loan and another 2 per cent had to get a cash advance on their credit card.
Roy Morgan found that more than half of all Australians are aware of BNPL platforms and those between the ages of 14 and 34 account for 55.9 per cent of users.
Specifically, those aged in the 25 to 34 range make up a staggering 33.5 per cent of all users. Only 14.2 per cent of Australians over 50 are BNPL users.
Mozo’s research reveals Afterpay as the main market player with 84 per cent of users respondents reported having an Afterpay account.
Zip Pay came in at 31.5 per cent followed by other platforms such as Open Pay and Latitude Pay at less than 10 per cent.