Australians dining out at restaurants and pubs will soon have the option of putting their tab on buy now, pay later, as the hugely popular scheme expands into hospitality.
The announcement has not been welcomed by everyone, however. Consumer advocates warn it is increasing options for people to go into debt without any credit checks.
Buy now, pay later (BNPL) giant Afterpay has partnered with hospitality behemoth Australian Venue Co, which operates more than 170 pubs and other venues across Australia.
Consumer and legal advocates have been campaigning for several years over the rise in popularity in BNPL, which allows consumers to purchase items - such as clothing, sporting goods, etc - from a retailer straight away, but pay for the items in installments.
The consumer doesn’t pay a fee, but if they miss a payment installment, they can be slugged with a penalty - usually about $10.
Most offer a limit of up to $3,000 but some programs go up to $30,000.
Katherine Temple, director of policy and campaigns at the Consumer Action Law Centre, told The Guardian that people already struggling with credit card and personal loans often found themselves in further trouble with BNPL.
She said Afterpay’s decision to move into hospitality venues, especially just before the holiday season, was a concern.
“We’ll see a lot of people in January with a lot of buy-now-pay-later debt that they need to pay off, whether for Christmas presents or going out over the Christmas period,” Temple said.
“My fear is that that will be on top of credit cards and other kinds of credit, and that’s going to exacerbate financial hardship for people.”
Afterpay was one of the first BNPL providers in Australia, launching in 2014, and is one of biggest, with more than 3 million active users in Australia and 14 million account holders across the world.
Banks join the party
The BNPL market is one of the most competitive in the country, with more than 17 companies offering the service, including banks, who are jumping on board the trend.
Suncorp and Commonwealth Bank have added the service to their offerings, while Westpac and NAB recently launched interest-free credit cards to entice customers back.
An Australian Securities and Investments Commission report, released in November 2020, revealed significant growth in the sector; the number of transactions across Australia rose from 16.8 million in 2017-18 to 32 million in 2018-19 - a 90 per cent increase.
Financial advisory MLC warned that BNPL programs could encourage people to spend impulsively and tempt people to spend money they didn’t have, while also impacting on their ability to obtain a loan, including a mortgage.
“Even though BNPL platforms usually don't require a credit check, nor does it affect your credit score, lenders - like banks - still regard BNPL services as a line of credit because you’re borrowing money you don’t have," MLC said.
“Lenders will take your BNPL purchases into consideration alongside your other debts, expenses, and overall risk profile when deciding if they should give you a home loan or other loans.”