BNPL: AUSTRALIA Shopping spree: But using BNPL loads the vulnerable with debt
Have it all... but at what cost? Fiona Guthrie, CEO of Financial Counselling Australia, believes BNPL providers might be flying now, but will pay for it later, if not brought into the same regulatory framework as other forms of credit Buy now, pay later (BNPL) is enjoying a worldwide explosion, thanks to the ease with which it enables customers to have what they want, when they want it – usually interest-free and paid down over instalments – with a quick swipe or click and barely a whiff of a credit eligibility check. The likes of Europe’s Klarna, America’s PayPal with Pay In 3, and Australia’s Afterpay and Zip are extending their point-of-sale credit facilities to millions more customers every week, and boasting unprecedented business growth as a result. In fact, Worldpay predicts the value of the worldwide BNPL market will rise by 177 per cent, from $60billion in 2019 to $166billion www.fintechf.com
by 2023, or roughly five per cent of global e-commerce, excluding China. Leading Swedish player, Klarna, established in 2005, recently secured new equity funding of US$639million from SoftBank’s Vision Fund 2 and existing investors to fund further global expansion – but particularly in the US. It has seen users almost double there, from 10 million in Q3 2020 to 18 million today. The darling of the venture capitalists, BNPL presents undoubted opportunities for merchants and financial services providers to grow their balance sheets. But Fiona Guthrie’s organisation, Financial Counselling Australia (FCA) – a country that, with the UK, has led the world in BNPL adoption by consumers – is seeing a downside.
And that’s because the FCA deals, first-hand, with the less positive impacts of this, so far unregulated, credit trend on vulnerable customers. She’s not alone in worrying that BNPL encourages them to amass levels of debt they can’t cope with. Not-for-profit FCA badges itself the ‘national voice of the financial counselling profession in Australia’, providing resources and support for counsellors, increasing awareness of and access to debt advice, lobbying for fairer marketplace practices and pushing for improved ways of dealing with people in financial difficulty. We asked CEO Guthrie to explain why she believes regulation is both essential and inevitable for this burgeoning market segment. Issue 21 | TheFintechMagazine
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