55% of Aussies leaned towards BNPL during holiday season

A poll of 6,500 consumers by online credit score provider Credit Savvy has shown 55 per cent of respondents intended to use buy now, pay later (BNPL) products to cover their expenses in the lead-up to Christmas.

The majority (77 per cent) indicated that BNPL would be the only form of credit they would use during the festive season.

Meanwhile 21 per cent said they would use BNPL to cover their essential groceries.

Around three-quarters of the survey respondents (76 per cent) had used BNPL products in the previous 12 months.

Around a third of people (33 per cent) had used buy now, pay later more than 10 times in the past 12 months.

Close to half (43 per cent) referred to the services as a “way to budget”.

The most popular purchase category was clothing and footwear, with 65 per cent of respondents using BNPL providers for their fashion purchases.

The second most popular category was personal technology, with 38 per cent of those surveyed.

More than half (58 per cent) of BNPL purchases were for transactions costing $2,500 or less, while 3 per cent totalled up to $10,000 or more.

Paul Nicolo, managing director of Credit Savvy commented the survey had found two of the top reasons for using BNPL products were convenience and budgeting.

However, he added the service could easily affect users’ credit scores, particularly if they perform credit checks or if there are missed payments.

“Although the Buy Now, Pay Later form of payment is widely promoted as ‘interest-free’ there may be costs associated with account management, late fees and other charges which can add up quickly,” Mr Nicolo said.

However, the majority (71 per cent) of respondents had not had late fees or charges imposed.

Around 29 per cent had copped late fees or charges, of which 77 per cent were $55 or less, while 4 per cent were $200 or more.

Treasurer Josh Frydenberg recently revealed the government has plans to reform Australia’s payments regulation system, to adjust for new technologies such as BNPL.

There are around 5 million active BNPL customer accounts. The service also accounts for around a fifth of online retail transactions by value.

The movement towards potentially tighter regulations for the sector will follow calls from the lending industry, such as that of CBA chief executive Matt Comyn, that BNPL providers should be held to stricter regulatory standards.

Growing BNPL presence

Many local banks have entered the BNPL market following the success of Afterpay, with Suncorp releasing its offering, PayLater, in late November.

It followed Visa confirming its BNPL solution would be available to Australian and New Zealand customers from 2022, while Mastercard rolled out infrastructure allowing banks and lenders to offer their customers BNPL products across its network.

In August, CBA rolled out its own product, StepPay, offering it to its 4 million customers.

But the bank more recently provided data analysis to a parliamentary committee, noting customers who used BNPL products were more likely to fall behind on debt repayments and to be in financial hardship.

Around 7.2 per cent of customers with BNPL accounts had overdrawn their transaction account, while 4.8 per cent had fallen behind on repayments and 6.4 per cent fell into financial hardship.

In contrast, customers without BNPL were less likely to struggle with debt or to be in financial hardship. Around 3.9 per cent of non-BNPL customers had overdrawn their transaction account, while 2.8 per cent fell behind on repayments and 4.9 per cent were in financial hardship.

BNPL was ranked the fourth most common type of debt held by consumers in the March quarter, with NAB research showing it was held by nearly one in five Australians.

ASIC published findings one year ago showing 22 per cent of customers prioritised paying off their BNPL debt over loan repayments or bills.

The regulator had discovered that 21 per cent of BNPL users had missed a payment in the prior 12 months and 5 per cent had missed mortgage repayments in order to pay off their BNPL debt.

[Related: ANZ opens digital offering]