EPA
The “buy now, pay later” shopping method has recently become extremely popular in Australia.
That is why it is not surprising that the shares of the companies “Afterpay” and “Zip co”, which were the first to offer these services, fell, since the well-known platform “Paypal” activated a new service – “pay in four installments”.
These companies are now racing to offer consumers a better product.
As it used to be in Yugoslavia?
In the former Yugoslavia, “check-in” has long been the rule. After it was abolished, the possibility of paying by check returned to Serbia in 2007.
It is about buying different items or groceries on several checks, with the first one arriving immediately, and the next one, depending on the trade, in three, six months or even a year, in equal monthly installments without interest.
This type of shopping is very popular among Serbs, because it not only allows the purchase of more expensive things, but is sometimes the only way to survive, because they buy basic groceries by check.
But judging by the first reactions of the Australian market to the new product “buy now pay later” (BNPL), Australians would simply adore “our” type of shopping “on hold”.
The market, experts say, simply exploded. The value of transactions through the market leader “Afterpea” doubled last year, from 5.2 billion to 11.1 billion dollars.
So it’s no surprise that local operators, such as “Afterpea” and “Zip Koa”, are facing increasing competition. In addition to PayPal, Australia’s largest bank, CBA (Commonwealth Bank), plans to launch its BNPL product, Steppe, in August.
Apparently, Apple, in cooperation with Goldman Sachs, also plans to add BNPL to its ApplePay system.
Are the Uzzians over-indebted?
Despite its rapid growth, this type of purchase in Australia accounts for only one percent of total payments. Well, despite that, there are serious concerns that this type of payment could lead to over-indebtedness of Australians.
Thus, the Australian regulator, the Australian Commission for Security and Investment (ASIC), which actively monitors the sector, expressed concern, pointing out the dangers of consumers making big bills.
According to ASIC research, this industry recorded $ 43 million in arrears in 2019, which is 38 percent more than the previous year. Some consumers were in such financial difficulties that they had to reduce their food purchases as a result of using BNPL schemes.
Is paying in installments dangerous?
For a consumer who has control over their finances, this type of payment is not risky and can be far cheaper than loans or credit cards, because no commission is paid.
Thus, “PayPal” allows the consumer to divide from 30 to 1500 dollars in four installments – the first is paid immediately, and the remaining three in the next month and a half, every 14 days.
The problem arises at the moment when the already indebted Australians start uncontrolled shopping through these platforms and only become aware when the installments reach payment. To avoid being kicked off the platform, many of them start to be late with bank loan installments, late with credit card debts or do not pay their electricity bills on time.
Stricter regulations – the solution?
It is the growing indebtedness, more precisely the inability to repay various loans and charges, that has led to the demand that this sector be regulated in the same way as any loan or credit.
However, the platforms say that the sector is well known to them and that everything is extremely regulated. For example, PayPal cannot be used for payments related to gambling, cryptocurrency trading, contracts that pay only the difference in value, for the purchase of foreign currency, transfers to other individuals and donations to non-profit organizations.
As BNPL commissions, which are around four percent, are paid by traders, not consumers, therefore their product is not placed in the credit category either. Therefore, the National Credit Bureau does not have the ability to control the users of these services.
The question arises as to what extent traders are protected in the event that an over-indebted client can no longer service the payment of their installments. For now, traders have the opportunity to increase the prices of their services or products by the amount of commission charged by the BNPL platforms and thus protect themselves from possible consumer abuse.
Citizens are advised to take care of their personal finances, and under what conditions they borrow, and inflation in Australia is almost non-existent, so nothing can “eat” your debt, but it still “stands” and waits for payment. .
The RBA (for now) will not intervene
Governor Philip Lowe said that the State Reserve Bank (RBA) did not intervene in connection with credit card payments until it reached 60 percent of total payments. This practically means that this institution cannot be expected to adopt more norms in the area of BNPL payments in the coming period.
BNPL account boom
ASIC data also show the expansion of deferred payment in Australia. Namely, the number of BNPL accounts in Australia rose from less than half a million in 2016, to 3.7 million in 2019.
How shops failed in Serbia
“Waiting” was especially popular at the time of inflation in Serbia, when all other installments were “eaten” by inflation. At that time, large traders, such as the Belgrade Department Store, failed, because they never managed to recover from financial losses.
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