A new report from ASIC has put figures to the aggressive growth of the buy now pay later (BNPL) industry, revealing that the total amount of credit extended in the space has nearly doubled in 12 months.
The number of BNPL transactions increased from 16.8m in the 2017-18 financial year to 32.0m in 2018-19 – an increase of 90%.
Troublingly, ASIC’s research also showed that one in five consumers are missing payments; in 2018-19, missed payment fee revenue for all BNPL providers included in the review – Afterpay, BrightePay, Humm, Openpay, Payright and Zip Pay – totalled over $43m, up 38% on the previous financial year.
While BNPL arrangements are often marketed as a budgeting tool or a way to make purchases more affordable, some consumers are missing payments and incurring fees as a result, eventually getting to a place of financial hardship where some have been pushed to take out additional loans in order to make their BNPL payments on time.
The report determined that while BNPL arrangements are “working for the majority of users” and clearly growing in popularity as a payment method, some consumers are “suffering harm”.
As such, ASIC concluded it is crucial the code of conduct the industry is alreayd developing is thorough and expansive; the regulator made it clear it expects the industry to work collectively to protect good consumer outcomes across the range of business models operating in the industry.
Additionally, ASIC highlighted the regulatory changes coming which should further address concerns, such as the design and distribution obligations which come into effect in October 2021.
Further research has also been commissioned to help ASIC better understand consumer behaviour and experiences with BNPL arrangements.