7 December, 2020
I thank the member for Mayo for raising this important issue. I very gladly second her motion. The buy-now pay-later scheme is an alternative to credit that allows consumers to purchase products and then divide the payments into allotments, usually into weekly payments. The majority of providers do not charge interest, but most charge late fees if a payment is missed.
Most people have heard about Afterpay and ZipPay companies. They have enjoyed a meteoric rise on the Australian Securities Exchange. Other companies are following suit and new entrants are emerging regularly. Enabled by the rise of innovation and fintech solutions, the buy now pay later industry is expanding its reach rapidly. This year, industry revenue amounted to almost $700 million, and analysts are projecting it may grow to $1.1 billion in 2025. We know that the COVID-19 pandemic has made this even worse, pouring accelerant on the growth of the industry as consumers forgo credit cards and use online retailers more. Recent reports suggest that five per cent of all online retail sales and 20 per cent of online fashion sales are now processed through Afterpay, which is Australia's most popular buy now pay later scheme. What is worrying is that this industry is impacting our youth. This industry is targeted to youth who have a tendency to steer clear of credit cards. We know that 60 per cent of users are between 18 and 34 years old and that there are more female than male users.
Buy now pay later providers are not subject to the controls that financial institutions are subjected to under the National Credit Act and therefore there are no responsible lending provisions. Buy now pay later providers are not subject to this. That means that they do not do affordability checks before handing out credits, and we are not seeing the safeguards that are necessary. The consequences are dire. The Australian Securities and Investments Commission found that one in five buy now pay later users are missing payments; that those aged between 18 and 29—which is half of those users—cut back on essential items to make repayments; and more than 1.1 million transactions in 2019 incurred multiple missed payment fees. Even more worrisome, the report found that 15 per cent of users, and under half of those under 29, have taken out additional loans to pay for the services. It is clear that this industry should be called 'buy now pain later', in particular for the youth. I'm concerned that users of this industry are not appropriately protected or catered for.