Australia’s BNPL sector set to come under tighter scrutiny
Australia’s Buy Now Pay Later sector is set to face stricter regulations from the Federal Government.
After years of having a relatively free run, Australia’s booming Buy Now Pay Later (BNPL) sector is about to face significantly tougher new regulatory hurdles.
The Federal Government is considering placing BNPL under the tightly regulated Australian Credit Act.
The full details of proposed changes are set to be unveiled in a presentation today by Federal Financial Services Minister Stephen Jones at a Responsible Lending and Borrowing Conference in Sydney.
Three regulatory options
In November 2022, the Australian Treasury announced three options for regulating the industry.
Option one considered increased affordability checks and self-regulation for BNPL firms.
Option two proposed that the BNPL industry could be partially covered under the Credit Act, with providers required to obtain credit licenses to remain operational.
Option three would mean the entire BNPL sector would need to meet the same regulations as credit card firms.
It appears that the Federal Government is now leaning firmly towards option three.
Interestingly, the proposed new changes come after a senate inquiry into fintech firms in 2020 concluded that there was no need to treat BNPL providers like credit card firms.
Rapid BNPL take-up
According to a recent study by ResearchAndMarkets.com, Australia’s BNPL payments were forecast to increase by 20.5% on an annual basis to reach US$14.2 billion in 2023.
Federal Reserve figures have estimated that there is approximately seven million active BNPL accounts in Australia, with users carrying out an average 18 transactions a year, paying around A$136.00 per item.
Ease-of-use
The ResearchAndMarkets.com report noted that ease-of-use has become a major attraction for Australian shopper, with 53% of Australians using BNPL purchases whenever they shop online.
It also identified younger shoppers as those that are most often using the service, with almost two-thirds (65%) of Australian BNPL buyers described as “Millenial” online customers, ahead of use Gen Z users with 51%, and Gen X 45%.
“Baby Boomers” are reported to have a growing interest with 33% of customers now coming from that age group, although on limited purchase per customer numbers.
Segmented market
Mordor Intelligence says the Australian Buy Now Pay Later market can be viewed as being broken up into three segments. Channel (online and point of sale), Enterprise (large enterprise, small & medium enterprise) and by End User Type (which includes consumer electronics, fashion and personal care, healthcare, leisure and entertainment and retail).
It concludes that dramatic shopping changes influenced by the COVID epidemic has played a major role in the rapid growth of BNPL in Australia, matching the surge in online purchases.
Mordor suggests that growth in the adoption of online payment methods among people across the world is also playing a role in accelerating the growth of the BNPL market.
It found that non-cash payments account for the majority of the value of payments in the Australian economy.