Australian regulator says one in five buy-now-pay-later users missing payment
[SYDNEY] One in five consumers using buy-now-pay-later (BNPL) services were missing payments and some were facing financial hardship, Australia's corporate regulator said in a highly anticipated report on Monday about the booming industry.
The report by the Australian Securities and Investments Commission (ASIC) fell short of calling for regulation, but warned that some consumers were cutting back on or going without essentials and even taking additional loans to make payments on time.
"Buy now pay later arrangements are clearly popular as a payment method. While working for the majority of users, some consumers are suffering harm," ASIC said.
Even before this year's coronavirus-driven shift online, nearly a third of Australia's adult population had a BNPL account last June, according to the report.
Since then, BNPL firms have seen an explosive rise in user growth and greater investor interest with Afterpay becoming one of Australia's 15 most valuable companies.
However, growth of the largely unregulated industry has also led to increasing scrutiny.
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Australia's central bank is reviewing the BNPL 'no-surcharge' rule, while UK's Financial Conduct Authority is looking at unsecured credit and is expected to release a report in early 2021.
ASIC's latest report is a follow-up to the one in 2018 that looked into consumer harm and potential regulation of the sector.
During 2018-19, missed payment fee revenue for six BNPL providers under the review climbed 38 per cent to more than US$31.35 million.
RBC Capital Markets said Monday's report showed that "most of the metrics have not deteriorated versus the initial report".
ASIC said data between January and June showed a decline in the number of transactions involving a missed payment.
Despite some of the findings, RBC does not expect any adverse impact to Afterpay or its smaller rival Zip. The companies in separate statements said they welcomed the report.
REUTERS
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