Buy Now Pay Later report 2019: Australia's spending habits, regrets and repayment woes

Buy Now Pay Later is big business in Australia, and growing. As many as 30% of Australian adults now have one or more Buy Now Pay Later accounts, which makes for roughly 5.8 million users nationally. 

It all started with Afterpay, which launched in Australia in 2015 as one of the first (if not the first) Buy Now Pay Later options. It’s still the major player in the space, with 84% of BNPL users surveyed by Mozo reporting having an Afterpay account. That’s even more significant when you consider that more than half have an account with only one platform.

And while Buy Now Pay Later has been around for a while now, the last two years or so have seen a boom in the number of users. A considerable 60% of users report having a BNPL account for two years or less, suggesting that the popularity of Buy Now Pay Later platforms is only increasing in recent years.

Mozo’s survey suggests that as Buy Now Pay Later’s popularity increases, Aussies are shifting away from credit cards, shopping through their BNPL app more and for some feeling guilty over how much they’re spending, or what they’re spending it on.

Buy Now Pay Later competing with debit and credit cards

Although credit cards and debit cards aren’t a thing of the past just yet, Mozo’s survey revealed that Buy Now Pay Later services are quickly becoming a popular alternative for spenders, with nearly half of respondents saying they’ve stopped using their credit card in favour of a BNPL service.

And it seems banks are well aware of this trend, with many rolling out their own Buy Now Pay Later options or investing in existing platforms.

“Buy Now Pay Later has changed the face of the way we pay for goods with more than 25% of users cancelling their credit card and a further 23% saying they no longer use it,” says Mozo Director Kirsty Lamont.

“The ease and convenience of opting for bite size scheduled payments has certainly taken Australia by storm, but the pitfall is that it’s incredibly easy to bite off more than you can chew, and miss a payment.”

App shopping on the rise

From 2018 to 2019, the rate of shopping via a Buy Now Pay Later app nearly doubled, up from 14% to 27% of all purchases.

“With in app purchases increasing so sharply, it’s important for users to take a moment to think about their spending habits. Are you shopping on your BNPL app for something you really want, or are you browsing and buying out of boredom, habit or convenience?” says Lamont.

What Aussies use Buy Now Pay Later services for

When asked to categorise their Buy Now Pay Later buys, 62% of people reported their shopping was “necessary” purchases (appliances, functional household items etc.) while 60% classified their purchases as “luxuries” (clothes, pet accessories etc.). Just 17% of Buy Now Pay Later purchases were categorised as “essentials” (things necessary to survival, such as food).

When it comes to what Aussies are spending the most on, clothing was by far the biggest category (32%) followed by appliances and electronics (19%) and home and entertainment buys (13%).

Women of all ages reported spending more on clothes than any other category, while men were more varied by age, but overall spent the most on appliances and electronics.

And it seems that not all those luxury purchases are well advised - 1 in 4 users admitted to regretting a Buy Now Pay Later purchase, and the same number worked to keep their purchases hidden from friends, family and partners.

“Our research found that one in four users are hiding their Buy Now Pay Later purchases from loved ones, indicating that a number of users aren’t proud of their spending habits. Males aged 25-34 were most likely to conceal their purchases with nearly 35% admitting they did so,” Lamont says.

Buy Christmas presents now, pay in the new year

And with 10 weeks left to Christmas, Buy Now Pay Later services are playing a big role in how users are planning to manage the cost of the silly season. In fact, among those surveyed, Buy Now Pay Later was the most popular choice for covering the biggest portion of the Christmas bill, followed by debit cards and savings.

“If it means skipping out on the credit card debt hangover Christmas spending can bring with it, then Buy Now Pay Later could be a good tool for Aussie spenders,” Lamont said.

“But, just like spending on a credit card, it’s vital that users still create a silly season budget and make sure they have an airtight plan for making repayments on their purchases. And don't buy more than you need just because you can.”

Does Buy Now Pay Later lead to overspending?

So we’re not always proud of our BNPL splurges - is it because we know we’re spending too much?

Half of the survey respondents reported spending more on Buy Now Pay Later platforms than when using their debit or credit cards, and almost 60% said that being able to break payments into instalments meant they purchased things they wouldn’t have usually purchased if they’d had to pay in one go.

Concerningly, about 28% have found themselves in financial strife thanks to Buy Now Pay Later platforms. Despite this, the overwhelming majority (87.3%) say they have their Buy Now Pay Later spending under control.

“Buy Now Pay Later users appear to be making a high number of purchases through the payment platform, rather than making the odd purchase here or there. 25% of users have 3-5 payments on the go at any time, which can be a lot to keep track of,” says Lamont. 

“To stay on top of payments it’s important you have a solid idea of your incomings and outgoing in your account and understand when your scheduled payments are. You will be paying for an item months after you’ve walked out of the store or click ‘buy now’, so it’s crucial to consider the possibility of poor credit ratings and additional costs through late payment fees if you don’t think you can meet your payments on time.”

Missed payments a problem for 1 in 3 users

Speaking of missed payments, 33% of users said they’d missed at least one repayment on their Buy Now Pay Later purchases, while 14% had missed multiple repayments. The worst offenders when it comes to missing one or more payments were men aged 18-24 years, with 45% admitting to missing a due date. 

Although women were more likely to have missed just one repayment, men were more likely to make it a habit, and younger users were more likely to miss a repayment than those aged 45 or over.

A habit of missing repayments could be bad news for your credit score, but 1 in 4 users weren’t aware of that risk. 

“There does seem to be a disconnect between awareness of the negative effects to your finances and action taken to meet payments on time,” Lamont says.

“Our research found that while three out of four users understood that missing a payment could affect their credit rating, one in three users had missed one or more payments, putting them at risk of damaging their credit score.”

How to use Buy Now Pay Later responsibly

Just like with any payment method or platform, the key to Buy Now Pay Later is using it responsibly, and being aware of your spending. Here are a few tips to keep your balance - on AfterPay or any other platform - under control.

• • Create a budget. The first step in any good money management plan is to create a budget. Buy Now Pay Later can be a great way to spread big costs out and can actually help you budget better - as long as you do it right. Work out how much disposable income you really have, and how much of that you can realistically afford to put towards payment instalments. Having a budget means you’re less likely to overspend and wind up being unable to meet repayments, finding yourself in strife and, potentially hurting your credit score.

• • Keep a record of your purchases. Having a record of your purchases will not only help you get organised for making repayments, but it will also help you keep track of how much you’ve spent so far and whether or not it fits in the budget you’ve laid out. You might also like to examine exactly what you’re spending on - a new outfit each week might not feel like much at first, but it could be an area to cut back your spending.

• • Don’t over-commit. This is part of having a budget in place, but make sure you haven’t let a number of small instalment payments trick you into over committing yourself to multiple Buy Now Pay Later purchases at once. This is particularly important if you have multiple accounts on different platforms - make sure your budget takes all of them into consideration.

• • Set payment reminders. You may not pay interest on a Buy Now Pay Later platform, but if you miss one of your payment instalments, you can be stung by a late fee. Make sure you’ve got reminders to keep you on track with instalments, especially if you’re juggling multiple repayments dates at one time.

• • Check the fine print. Last but not least, like any other financial product or service you sign up for, you should be familiar with the fine print, so you’re aware of any traps, obligations or rights you have. For example, do you know how getting a refund works with your chosen platform? It’s important to read the fine print for each platform, you can start by checking out our guide to the traps of Afterpay spending.