ASIC puts spotlight on buy now pay later industry
ASIC has released its first review of the rapidly growing buy now pay later industry. The review of this diverse and evolving market has found that buy now pay later arrangements are influencing the spending habits of consumers, especially younger consumers. A buy now pay later arrangement allows consumers to purchase and obtain goods and services immediately but pay for that purchase over time. While some buy now pay later providers offer fixed term contracts up to 56 days for amounts up to $2000, other providers offer a line of credit for amounts up to $30,000. ASIC found that the number of consumers who have used buy now pay later has increased five-fold from 400,000 to two million over the financial years 2015-2016 to 2017-2018. The number of transactions has increased from about 50,000 during the month of April 2016 to 1.9 million in June 2018. At 30 June 2018, there was $903m in outstanding buy now pay later balances. ASIC Commissioner Danielle Press said although the 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,” she said. “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. Most consumers believe that these arrangements allow them to buy more expensive items than they would otherwise and spend more than they normally would. Providers also use behavioural techniques which can influence consumers to make a purchase without careful consideration of the costs. “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 said. “One area we will be targeting is where consumers are paying more than they need to for using a buy now pay later arrangement.” AASIC’s MoneySmart website at www.moneysmart.gov. au explains how buy now pay later services work and how consumers can avoid getting into financial trouble when using them.