The share of Australian consumers using buy now pay later (BNPL) at online checkouts will more than double by 2024, according to forecasts from global payments provider FIS.
It means potentially millions more Australians are expected to take up the payment method which welfare groups have warned harms consumers and needs government regulation.
BNPL allows users to split up and defer payments until after they receive a good or service without paying interest. Providers charge late fees for missed payments instead but make most of their revenue from the fees they charge retailers to include the payment option in their checkouts – typical between three and six per cent of the transaction.
Currently, around 10 per cent of all ecommerce transactions in Australia use BNPL, trailing only a handful of European countries in terms of the payment method’s popularity. Globally the rate is much lower, around two per cent.
By 2024 BNPL’s share of ecommerce transactions in Australia will have more than doubled to 20 per cent, according to FIS, a global payments company that moves more than US$9 trillion dollars every year.
BNPL taking off
The company today released its sixth annual Global Payments Report, revealing continued growth in digital payments and a corresponding decline in the use of cash around the world.
The report, based on FIS’s own research and third party data, shows BNPL is currently used for two per cent of all ecommerce transactions globally. In Australia, where market behemoth Afterpay launched and several other established providers exist, BNPL is used in 10 per cent of ecommerce transaction.
BNPL will continue to grow rapidly in popularity, according to FIS forecasts. BNPL will nearly double to 13.6 per cent of ecommerce transactions around the world by 2024.
In Australia, it will more than double to 20 per cent by 2024.
“We do see the [BNPL] trend continuing,” FIS general manager for global ecommerce, APAC, Phil Pomford told media ahead of the report’s release this week.
“That’s built off, I guess, the number of players coming into the market, the fact that it is already so embedded in the market, and also the growth that we’re expecting to see within the market as well.”
Pomford said Australia is a BNPL world leader, with several mature providers targetted at different market segments. But providers are now also looking to the more lucrative US market, establishing partnerships with local firms to release the payment option to millions more American consumers.
Pomford told Which-50 regulations will quickly follow BNPL around the world, something that will ultimately be positive for providers and consumers.
“We see regulations only as positive things. [FIS is] a regulated business ourselves we work in regulated industries. For us what that does obviously is it opens up transparency and brings protection to consumers and brings protection to all within the ecosystem.”
This week Australia’s BNPL industry brought into effect its own code of practice, outline commitments for things like late fee capping and background checks for certain levels of new BNPL transactions.
The code follows mounting scrutiny about the payment method and consumers’ capacity to meet the payment terms, including a warning from the financial regulator that one in five BNPL users have missed payments and some were skipping meals to make them.
Australian consumer groups have warned the self regulation will not be adequate, however, and the payment method should be regulated externally like credit.