Image: Wikimedia Commons
By REBECCA HERNANDEZ
A survey has found that ‘One in Two’ Australians remain unaware of the risks of ‘Buy Now Pay Later’ (BNPL) services, despite their increasing prevalence.
Assessing an independent panel of over 1000 Aussies, the 2023 survey commissioned by finance service ‘Money.com.au’ learned that almost half (47%) of respondents believed “that [BNPL] providers” such as Afterpay and Zip Pa,y “are bound by the same consumer protection laws and requirements to comply with the same responsible lending obligations as traditional banks,” which is presently incorrect.
Confusion and Misunderstanding
Though “more than half (59%) of Aussies have tried at least one BNPL service”, and over “158,000 Australian businesses [are] accepting BNPL payments”, “a large proportion of Aussies are not aware of the potential risks associated with using these BNPL platforms,” said Money.com.au in a statement.
Financial adviser and spokesperson for Money.com.au Helen Baker told CityHub that confusion and misunderstanding is rampant among consumers who enjoy Buy Now Pay Later services.
“I think what we’re finding is that people have a little bit of confusion of how Buy Now Pay Later works, and what are the pros and cons of using it,” she said.
“There seems to be a misunderstanding and its interesting because even this week the Finance Minister was raising issues around BNPL, so there is definitely concern about how society is using them, and they might get trapped by them.”
Beyond initial false impressions about personal consumer protections, many survey respondents demonstrated further misconceptions about how Buy Now Pay Later services could affect their economic lives and long-term financial health.
“38% of users incorrectly believe missing a BNPL payment will not affect their credit score,” identified the survey, according to responses.
While “24% think BNPL is not a form of credit.”
Affecting Young Consumers
Individuals who answered in this line skewed disproportionately younger, where respondents aged 18-30 years old were more likely to be oblivious to the risks of Buy Now Pay Later services.
Money.com.au accounts for this, finding that young consumers were more disposed to adopting BNPL services because they were more familiar and had fewer barriers to entry.
“Younger Australians are perhaps using the BNPL services more because of their affiliation with apps and because they have less frugal experiences with money,” said Baker.
“While younger generations are more inclined to purchase via BNPL credit lines, they’re also more likely to be ill-informed of the potential consequences of using BNPL services, including 28 per cent of 18–30-year-olds indicating they do not think BNPL is a form of credit.”
Government Pushback
Looking to the future of Buy Now Pay Later services and Australia, Baker imagines greater government intervention and regulation will assuage risks for would-be consumers.
“I think with the pressure from the Minister, [the government] is going to start to put a lot of pressure on BNPLs and maybe even start to restrict it a bit,” she said.
Indeed, this week Financial Services Minister Stephen Jones announced that BNPL services will soon be regulated under standard credit laws – offering greater protections and less risk.
“BNPL is a credit product and is in competition with other forms of credit. I am a fan of the innovation and competition it has brought, but they have to meet a set of standards imposed on other credit products,” said Mr Jones to The Australian Financial Review.
An extremely important change.
For too long the former Government sat on their hands as we saw the harms associated with an unregulated buy now, pay later industry play out in the community. Congratulations to @StephenJonesMP for your work on this reform. pic.twitter.com/XkU3KNLcGN — Alicia Payne MP (@AliciaPayneMP) May 22, 2023
