Walker Hill Group

How Buy Now, Pay Later Is Influencing Spending

Did you know that one in six customers who use buy now, pay later payment methods such as Afterpay and Zip Pay, are running into financial strife? With the ever-increasing market of payment option providers, ASIC has completed its first review of this industry with some interesting finds including that these arrangements are having some negative impacts on spending habits.

As the name suggests, buy now, pay later arrangements allow shoppers the flexibility to delay and part pay for products ranging from clothes to airfares. Often these services will have an initial set up fee and late payment penalties often also apply for payments made after the scheduled payment date. With the convenience of this industry now making cashflow easier, ASIC has put providers, such as Afterpay, Zip Pay, Certegy Ezi-Pay, Oxipay, BrightePay and Openpay were put under the microscope to see how customers outcomes are really affected. Over the last two years, this industry has exploded, with 1.9 million transactions and 2 million consumers using buy now, pay later services in 2018.

There are a few red flags that have highlighted potential issues in the future with the delayed payment industry, especially with our younger users between 18 and 30-year-olds who make up around 60% of the industry’s users.


With the buy now, pay later arrangements now making it easier to spend money, ASIC has flagged that buyers overcommitting to purchases is a real problem that many are facing. More than 50% of users are now spending more than they were previously spending with help from the buy now pay later model and 1 in 6 users have become overdrawn, delayed other bill payments or borrowed additional money to make their arrangement payments.

This is also hindered by the fact that the younger users are on lower wages, with 2 out of 5 users also earning less than $40,000 p.a. and, of these, 40% are working part-time or studying. Furthermore, the review stated that there was close to $1 billion outstanding on payments, which is only due to rise further as the popularity of these services continues.

Late Fees

Although many of the Buy Now, Pay Later providers don’t charge for their service, hidden costs, such as set up fees and late payment penalties, can also act as a financial surprise for users. In 2018, industry heavyweight, Afterpay, had a huge jump in income from their late fees. Surging to staggering $28.4 million, late fees equated to 24.4% of Afterpay’s overall income for the 2017-2018 financial year. When you consider that the 2016-2017 financial year’s late fees totalled just $6 million, this 375% increase not only shows the increase of popularity but also the overcommitment that is happening.


ASIC also tested each of the providers performance in areas such as transparency, dispute resolution and hardship. As a result, providers have made improvements that will benefit consumers. For example, the providers are now members of the new Australian Financial Complaints Authority, and providers are reviewing their standard form contracts for potentially unfair contract terms.

Relying on buy now, pay latter arrangements a little too much and want to get your debt consolidated into one payment?

Contact our Finance Team today to find out more.

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