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Buy Now, Pay Later revs up purchases and debt says Finder
By Leon Gettler, Talking Business >>
THERE has been a huge uptake of Buy Now, Pay Later (BNPL) in recent years.
But according to Finder research, much of the growth is coming from Gen Y and Gen Z.
According to Graham Cooke, the head of consumer research at Finder, it’s just a lot easier for that generation. 
“It’s really been the credit option of the youth now for quite a while,” Mr Cooke told Talking Business.
“We’ve seen quite a number of young people avoid the credit card market completely and go straight to Buy Now, Pay Later because it is an easier to access credit product,” he said.
“It’s usually lower risk, you’re not opening up that huge debt trap you can potentially have with a credit card and we’ve seen a lot of young people going for By Now, Pay Later and ditching the credit card.”
Credit cards on the ‘up’ too
That said, Finder research was also showing that the cost of living crisis had pushed people closer to credit cards with up to 16,000 credit cards being added to the market every month.
However, even though BNPL was lower risk, it was not without risk.
“There is no such thing as a free lunch, there is no such thing as risk free debt,” he said.
“It’d definitely be lower risk than credit cards, but it’s not risk-free. It does give you the potential of building up a load of debt that you will have to pay back, especially if you’re not paying it back on time.
“By Now, Pay Later companies make a quarter of their profits from late fees which can build up dramatically over time.”
He said the average amount owed on BNPL systems was “north of $1000”.
“Our advice would be don’t get involved in Buy Now, Pay Later unless you’re going to pay later. That’s the key point.”
BNPL not risk-free
The point is that whoever was lending the money was taking on some risk.
“It’s a lower cost option but it’s definitely not risk-free and you need to be as aware of paying your debt back on that as you would with your credit cards,” Mr Cooke said.
He said the difference between credit card debt and BNPL debt was that with BNPL debt, there was no interest owed to the company.
“The whole balance could be considered debt to a degree because you have to pay it back. It’s not the same nature as credit card debt, it’s not as risky as credit card debt,” Mr Cooke said.
That said, there are many people who might have missed on paying, say, an electricity or gas bill because they owed so much on BNPL.
Finder research showed that one in eight Australians, or 12 percent of the population, had not paid a bill because they owed money to BNPL.
It also showed that cost of living pressures had been in the ‘extreme range’ for a couple of years. Which, he said, is leading more people to BNPL with less ‘risk’.
“So it’s the high cash rate, high interest which is making credit products like BNPL and credit cards essential,” Mr Cooke said.
Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness
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