Buy-Now, Pay-Later

Summary of infographic

Of the 1,781 people surveyed:

• 44% use BNPL at least every 2 weeks
• 83% used BNPL in the last year
• ¼ are new users (started using in last year)
• ¾ use more than one provider (18% use more than four providers)
• 90% have other debts as well as BNPL
• 76% have other short-term debts (credit card/overdraft/loans etc. but excluding mortgages and student loans)
• 50% also have a credit card
• 20% pay of BNPL with a credit card
• 75% use BNPL as credit card alternative
• 24% think BNPL has greater risk of non-payment than credit cards

BNPL was stated as commonly used when:

• Can’t afford the full price (78%)
• Whenever it’s made available (52%)
• BNPL provides a discount (25%)

BNPL user say it’s easy to understand….

• The full cost (96%)
• Additional fees etc. (64%)

BNPL most commonly used for:

• Clothes/shoes (87%)
• Technology (53%)
• Every-day items (48%)
• Health/Beauty (44%)
• Leisure/Toys (37%)

20% have missed at least one BNPL instalment

6% have missed more than three BNPL instalments

Of those who have missed instalments in the past:

• 65% miss fewer instalments than they used to
• 43% feel they are now better at managing instalments

9% of those surveyed, said that because of BNPL they delayed bills and other essential purchases due to:

• Timing of BNPL occurred at the same time as other expenses (60%)
• Having multiple BNPL providers (44%)
• Being enticed by BNPL marketing and bought more than could afford (38%)
• Inability to afford the full cost of the purchase (32%)
• Being focused on the first instalment rather than the full cost (30%)
• The BNPL credit limit increasing beyond what was affordable (29%)
• A change in personal circumstances e.g. job loss (25%)

24% asked their BNPL provider for assistance when they had missed BNPL instalments or had to delay bills and other essential purchases. Of these, 37% were satisfied.

77% who didn’t ask for help said this is because they thought they:

• Couldn’t ask (53%)
• Could solve it themselves (44%)
• Wouldn’t get any help (36%)
• Might get cut off (28%)

6% have used BNPL before but stopped because:

• Needed to stop over-spending (46%)
• Switched to credit/debit (31%)
• Generally now spending less (23%)

Financial mentoring organisations who work to help New Zealanders in financial difficulty have made MBIE aware that BNPL could be creating financial hardship for some consumers.

While BNPL products have features of consumer credit contracts, they fall outside the strict definition in the CCCFA (section 11) because they do not charge interest, fees or take a security interest over goods. They are subject to the Fair Trading Act 1986, and some BNPL providers offer other products which are CCCFA regulated.

CCCFA (section 11)(external link) — New Zealand Legislation website

During the MBIE 2018 Review of Consumer Credit, there was found to be little evidence of harm caused by BNPL products at that time and therefore they were not brought within the scope of the CCCFA. Through that review the Government created a new power under the CCCFA to extend legal requirements to BNPL and other non-regulated credit products if warranted.

Review of consumer credit law

New power to extend legal requirements to BNPL and other non-regulated credit products(external link) — New Zealand Legislation website

The Government’s overall objective is that the BNPL sector delivers long-term benefits to consumers through an effective BNPL sector - one where addressing the risks of financial hardship is balanced against the benefits of BNPL.

The interests of BNPL consumers should be protected, so that they are confident and informed participants in a transparent, competitive and innovative BNPL sector.

BNPL should be affordable and suitable to the needs of the consumer. A number of features that could help address the risk of financial hardship to consumers are outlined in the discussion paper.

• Financial hardship can take a range of forms. This could include consumers missing or being late with payments, which adds to the debt they already face. This could also include consumers meeting their BNPL instalment/payment but not being able to afford other expenses (such as a power bill or groceries) because instalments/payments are collected automatically via debit card or credit card.
• The risk of financial hardship is increased if the consumer uses more than 1 BNPL provider.

• There are also benefits to using BNPL. BNPL can be an effective and low-cost way to spread the costs of purchases without paying interest.
• BNPL can also be useful for businesses as it may generate additional sales.
• In terms of economy-wide benefits, BNPL disrupts the credit market by providing consumers with a low-cost alternative to existing credit products, resulting in greater innovation and competition, and therefore better outcomes and options for consumers.