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1 in 5 prioritises ‘buy now, pay later’ payments

Twenty-two per cent of “buy now, pay later” customers have prioritised paying this debt off over loan repayments or bills.

The findings come in a new report from the Australian Securities & Investments Commission (ASIC) on the buy now, pay later industry, which enables consumers to buy and receive goods and services immediately from a merchant, and repay a buy now, pay later provider over time. 

According to ASIC’s report 672, these arrangements have increased in popularity in the last few years, rising by 90 per cent between the 2017-18 and 2018-19 financial years alone, when the number of these transactions hit 32.0 million.

As at 30 June 2019, there were around 56,000 merchant agreements in place across the six buy now, pay later providers covered in the review, ASIC found. 


ASIC’s research also warned that while the arrangements are working well for the majority of users, some consumers are suffering harm.

1 in 5 missing repayments

Its research found that one in five customers is missing payments, and a similar proportion have missed paying their mortgage in order to pay a buy now, pay later provider.

The conclusion is based off a survey of 1,655 consumers.

The report reads: “Our consumer research indicated that 21 per cent of buy now, pay later users who were surveyed missed a payment in the last 12 months.

“In the 2018-19 financial year, missed payment fee revenue for all buy now, pay later providers in our review totalled over $43 million, a growth of 38 per cent compared to the previous financial year,” ASIC said.

It continued: “From our research, we also found that some consumers who use buy now, pay later arrangements are experiencing financial hardship, such as cutting back on or going without essentials (e.g. meals) or taking out additional loans in order to make their buy now, pay later payments on time.”

Indeed, the report found that around 20 per cent of consumers went without essentials in the last 12 months to make their repayments, while 15 per cent had taken out an additional loan. 

Of the consumers who said they had taken out an additional loan in order to make their buy now, pay later payments on time, half of them were under the age of 30.

However, more than two-thirds (68 per cent) of these customers who took out a loan said they had also missed a payment with a buy now, pay later provider.

Two-fifths (44 per cent) also said they separately held a small and/or medium amount credit contract.

These consequences were more prevalent among consumers who used multiple buy now, pay later arrangements. For example, while 10 per cent of consumers who used one buy now, pay later arrangement in the last 12 months reported having to take out an additional loan to meet their payments, this increased to 13 per cent of consumers with two such arrangements and 20 per cent of consumers with three.

Five per cent of buy now, pay later borrowers missed mortgage repayments

ASIC’s report also showed that 22 per cent of borrowers who had missed repayments had missed a mortgage repayment in order to do so.

This equates to just under 5 per cent of the total customers surveyed in the report.

Forty-four per cent of consumers who had missed other repayments said they had missed paying household bills, while nearly a third had missed credit card payments.

Again, approximately half of these consumers were between the ages of 18 and 29.

Just over half of the borrowers who had missed other payment responsibilities were found to have used at least two different buy now, pay later arrangements in the last six months, with more than a quarter (29 per cent) having made at least six buy now, pay later purchases in the last six months.

The ASIC report continues: “[O]ur review shows additional costs are borne by some consumers who are incurring missed payment fees and who report financial stress and difficulty meeting other financial commitments.

“While most buy now, pay later arrangements are marketed as a budgeting tool or a way to make purchases more affordable, some consumers are missing payments and incurring fees as a result...

“There is also a risk that consumers may be paying inflated prices for some goods and services when using a buy now, pay later arrangement,” ASIC warned.

It did note, however, that there are regulatory changes coming that will impact the buy now, pay later industry, with the design and distribution obligations coming into effect in October 2021.

Further, the industry is also developing a code of conduct, which ASIC said “provide an opportunity for the industry to address consumer harm”.

[Related: BNPL service launched for property ownership]

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