Average debt among BNPL users declines, late fees remain concerning for many
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The era of unchecked spending through Buy Now Pay Later (BNPL) services is drawing to a close, as Afterpay, one of the leading players in the market, announces a significant change to its user policy.
The BNPL industry, which has been a godsend for many but a potential pitfall for the unwary, is set to introduce a spending cap feature that aims to help users manage their finances more responsibly.
For our members who have embraced the convenience of BNPL services, staying informed about these changes is crucial.
Afterpay's decision to implement a spending cap responds to growing concerns about the ease with which consumers can accumulate debt.
According to a recent Finder survey, two in five Australians used a BNPL service in the six months before August, with Gen Z and millennials being the most frequent users.
The average debt for BNPL users was reported at $1,052, a noticeable decrease from $1,391 in July 2023 but still significant for many households.
The new feature will launch in late 2024 and allow users to set a spending cap within the Afterpay app.
‘When it’s available, it will allow you to set a cap on what you can spend with Afterpay with a few simple taps in the app,’ the app said.
Afterpay's proactive approach is a step towards self-regulation in an industry that has been largely unregulated until now.
Afterpay does not require an external credit check to set up an account; borrowing on the platform does not affect a user's credit score.
Customers are offered an initial borrowing limit of $600, which can increase over time as they demonstrate responsible shopping behaviour.
‘The longer you have been a responsible shopper with Afterpay—making all payments on time—the more likely the amount you can spend will increase,’ the website wrote.
However, this convenience's flip side is the financial stress risk.
Missing payments and having orders declined due to insufficient funds can decrease a user's estimated spend limit.
A June survey by Compare Club revealed that 20 per cent of BNPL users incurred late fees every month after missing a payment.
The Australian government is taking steps to protect vulnerable consumers by introducing legislation that will make it harder for them to access credit schemes without adequate background checks.
The Responsible Buy Now Pay Later and Other Measures Bill, which is currently before the senate, aims to regulate BNPL providers by ensuring they conduct complete affordability checks similar to those required for credit cards and other loans.
The Australian Securities and Investment Commission has acknowledged the benefits of BNPL arrangements but also expressed concern about consumers incurring missed payment fees and experiencing financial stress.
Assistant Treasurer Stephen Jones emphasised, ‘This legislation regulates BNPL in a proportionate way that provides necessary consumer protections while maintaining the essential benefits,’
‘This will not change the underlying obligation not to provide credit unless it’s affordable and meets the consumer’s needs.’
Have you found them helpful for managing your budget, or have they tempted you to overspend? Feel free to share your thoughts and opinions in the comments below.
The BNPL industry, which has been a godsend for many but a potential pitfall for the unwary, is set to introduce a spending cap feature that aims to help users manage their finances more responsibly.
For our members who have embraced the convenience of BNPL services, staying informed about these changes is crucial.
Afterpay's decision to implement a spending cap responds to growing concerns about the ease with which consumers can accumulate debt.
According to a recent Finder survey, two in five Australians used a BNPL service in the six months before August, with Gen Z and millennials being the most frequent users.
Afterpay lets users set spending caps on their BNPL purchases in the app. Credit: Shutterstock
The average debt for BNPL users was reported at $1,052, a noticeable decrease from $1,391 in July 2023 but still significant for many households.
The new feature will launch in late 2024 and allow users to set a spending cap within the Afterpay app.
‘When it’s available, it will allow you to set a cap on what you can spend with Afterpay with a few simple taps in the app,’ the app said.
Afterpay's proactive approach is a step towards self-regulation in an industry that has been largely unregulated until now.
Afterpay does not require an external credit check to set up an account; borrowing on the platform does not affect a user's credit score.
Customers are offered an initial borrowing limit of $600, which can increase over time as they demonstrate responsible shopping behaviour.
‘The longer you have been a responsible shopper with Afterpay—making all payments on time—the more likely the amount you can spend will increase,’ the website wrote.
However, this convenience's flip side is the financial stress risk.
Missing payments and having orders declined due to insufficient funds can decrease a user's estimated spend limit.
A June survey by Compare Club revealed that 20 per cent of BNPL users incurred late fees every month after missing a payment.
The Australian government is taking steps to protect vulnerable consumers by introducing legislation that will make it harder for them to access credit schemes without adequate background checks.
The Responsible Buy Now Pay Later and Other Measures Bill, which is currently before the senate, aims to regulate BNPL providers by ensuring they conduct complete affordability checks similar to those required for credit cards and other loans.
The Australian Securities and Investment Commission has acknowledged the benefits of BNPL arrangements but also expressed concern about consumers incurring missed payment fees and experiencing financial stress.
Assistant Treasurer Stephen Jones emphasised, ‘This legislation regulates BNPL in a proportionate way that provides necessary consumer protections while maintaining the essential benefits,’
‘This will not change the underlying obligation not to provide credit unless it’s affordable and meets the consumer’s needs.’
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