Buy Now Pay Later (BNPL) services are becoming increasingly popular across Australian retail and in some venues, and the Government has outlined plans to regulate this industry.
There are currently over seven million BNPL accounts in Australia, and speaking on Today this morning Financial Services Minister, Stephen Jones, said the Government wants to ensure they are being marketed correctly and that people are not getting themselves into financial trouble as a result of using the services.
“A lot of people have got not one, not two, but three or four BNPL accounts, and it appears that there are a small percentage of the market, where people are getting into hot water,” the Minister said.
“We want to ensure that this product is operating safely, where it’s being marketed, where it’s being pitched to consumers, it’s operating within the normal guardrails that operate with other credit.”
In November 2020 ASIC released a report on BNPL, which stated the number of transactions has increased from 16.8 milliom in the 2017-18 financial year, to 32 million in 2018-19, an increase of 90 per cent. Latest estimates indicate that the 2021 finacial year saw 78 million BNPL transaction, valued at around $11.9bn.
Speaking about the changes the Government is looking at, Minister Jones told Channel Nine: “We’ll spend a few months consulting and I’ll consider the outcomes of those consultations over Christmas. But as a minimum, I think putting in place some sort of credit checks to ensure that the product is affordable and suitable for the people that are being pitched at.
“We don’t want to see people who are in the same situation they were in the bad old days of the credit card and other parts of the credit market where they might have had five, six, seven or eight credit cards.
“No one company knew that the other one had one and this person was just simply unable to pay off their debts and they’re in a credit downward spiral. And that’s what we want to address.
“We want innovation. We want people to have access to these great products, but we want to ensure that there’s proper guardrails in place.”
The industry has implemented its own code of conduct around BNPL services and regulation and the Minister said part of this consultation will include looking at that code in more detail.
“We will look at the industry code, the voluntary code that’s in place at the moment and see where the gaps in that are.
“As I strongly believe will be the case, there is a need for further regulation that we can move that through Parliament and by this time next year at least, we’re not having this conversation, but we’re saying, ‘this is a good product, it’s giving people flexibility, but we know that where it’s offered and it’s occurring safely’.”