Number of consumers using buy now, pay later rises five-fold
The number of consumers who have used the rapidly growing buy now, pay later arrangement has increased five-fold from 400,000 to 2 million over the financial years 2015-16 to 2017-18, ASIC has said.
As of 30 June 2018, there was $903 million in outstanding buy now, pay later balances, the Australian Securities and Investments Commission (ASIC) said following its review of the industry.
The review found that buy now, pay later arrangements are influencing the spending habits of consumers, especially younger people.
The arrangement allows consumers to purchase and obtain goods and services immediately but pay for that purchase over time.
ASIC commissioner Danielle Press said, “Although our review found many consumers enjoy using buy now pay later arrangements and plan to continue using them, there are some potential risks for consumers in using these products.
“The typical buy now, pay later consumer is young, with 60 per cent of buy now, pay later users aged between 18 to 34 years old. We found that buy now pay later arrangements can cause some consumers to become financially overcommitted and liable to paying late fees.”
One in six users had either become overdrawn, delayed bill payments or borrowed additional money because of a buy now, pay later arrangement, ASIC revealed.
“The exponential growth in this industry, along with the risks we have identified, means this will remain an area of ongoing focus for ASIC,” Ms Press added.
“One area we will be targeting is where consumers are paying more than they need to for using a buy now, pay later arrangement.”
Given the potential risks to consumers, ASIC said it supports extending the proposed product intervention powers to all credit facilities regulated under the ASIC Act.
Product intervention powers will provide ASIC with a flexible tool kit to address emerging products and services such as buy now, pay later arrangements.
This will ensure ASIC can take appropriate action where significant consumer detriment is identified, it concluded.