Would You Buy A Beer With Afterpay?
Afterpay has announced that it’s moving into the hospitality industry, which means that soon you’ll be able to eat your pub parmi now, and pay for it later.
But financial experts are concerned about how many people could end up in debt because of Afterpay’s expansion, and are dubbing the current lending market as ‘the wild west with no sheriff’.
How Does Afterpay Work?
Afterpay has partnered with a company called Australian Venue Co, which has pubs and restaurants all around Australia, and it’s going to be available in over 160 of its venues.
Afterpay has changed the game with how people buy retail items, and the company has amassed millions of customers worldwide.
It splits a purchase into four interest-free payments, but if one of the repayments is late then the customer is charged around $10.
Because the four instalments don’t accumulate interest like credit cards or bank loans, companies like Afterpay aren’t held to the same regulations around responsible lending.
Consumer advocates have warned before that the ‘buy-now-pay-later’ model could mean that people might spend money they don’t have and find themselves in a lot of debt.
And with Afterpay’s expansion into the hospitality industry, that warning is now being repeated.
What Are People Saying About It?
Afterpay isn’t actually the first buy-now-pay-later service available in restaurants.
Payo is another buy-now-pay-later company that was designed specifically for hospitality venues, and it’s partnered with over 700 venues across Sydney, Melbourne, and the Gold Coast.
Payo’s CEO Taf Chiwanza said that the inspiration for the company came after seeing the huge growth of buy-now-pay-later in retail over the last few years.
Katherine Temple is the director of policy and campaigns at the Consumer Action Law Centre, and she says that companies operating in this space “exist in a regulatory void”.
They don’t really check if you can afford to make the repayments, and while some companies have good safeguards in place, a lot of them don’t.
What’s The Deal With The BNPL Industry?
When buy-now-pay-later first took off, most people used it for retail purchases.
But now it’s being used for more than just splurge spending.
There are 6.1 million buy-now-pay-later accounts in Australia, which represents around 30% of Australian adults, and the total amount of customers has almost doubled since 2019.
A report by the Australian Securities and Investments Commission (ASIC) showed that the industry is continuing to grow, and data from Reserve Bank says that credit products are plateauing and the buy-now-pay-later industry is taking up that market share.
But these debts can be hard to shake, and one consumer survey found that some Afterpay users were skipping meals, and even taking out other loans, in order to make their payments on time.
The buy-now-pay-later industry has generated over $43 million from missed payments and, with Afterpay now available to use in hospitality venues, it opens the potential for more people to find themselves in debt.
Experts are callings for changes to current regulations.
They want to see the ASIC have the power to step in if it felt that a service was causing harm, even if any laws haven’t been broken, and for a code to be developed that would make the buy-now-pay-later industry safer for users.