Australia’s younger adults are increasingly embracing buy now, pay later services, with more than 40 per cent of 18 to 39-year-olds holding installment loans in the past year, a sharp uptick from the 2019 figure, according to a Reserve Bank of Australia survey. 

Overall, almost one third of Australian adults used BNPL in the past 12 months, a rise of about 8 percentage points from 2019, an RBA research paper based on its 2022 consumer payments survey showed.

On average, BNPL users held two different accounts, according to the survey of almost 1,000 people, which for the first time collected data on the number of accounts consumers had with different providers.

The data offer a glimpse into consumer habits around BNPL, an industry that has surged in popularity since the pandemic. The services, provided on apps from companies like Afterpay, Affirm Holdings, and Klarna Bank and typically offering interest-free credit that’s repaid in installments, can be helpful for people who want to avoid rising credit-card interest rates. However, they have been criticised for leading to irresponsible spending and fuelling debt problems. 

In May, Australia’s government said it plans to regulate BNPL firms under credit laws, which means they will have to adhere to responsible lending obligations, hold Australian credit licences and face a range of minimum standards on conduct and products. 

The RBA research paper said consumers with access to multiple BNPL accounts may encourage competition in the market, as providers compete to entice consumers to use their service. 

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However, since BNPL firms typically do not allow merchants to pass on the high cost of accepting their service directly to BNPL users through a surcharge, non-users may end up subsidising BNPL users as the price of goods and services are raised generally, it said.

The paper also showed that younger consumers are more likely to use debit cards more intensively whereas older consumers tend to use credit cards and cash more frequently to make payments. Those under 30 made more than three-quarters of their payments using debit cards, according to the report.

Cash transactions continued to decline across all age groups, comprising 13 per cent of all consumer payments, down from 27 per cent in 2019, according to the report. BLOOMBERG