Buy-now-pay-later demand booms as more Christmas presents bought online

Friday, 18 December 2020

New Zealand Post workers are in the thick of a record-breaking Christmas amid a nationwide online shopping frenzy.

A surge in online shopping this year has boosted demand for buy-now-pay-later (BNPL) services, such as Afterpay and Laybuy.

Data from credit reporting company Centrix showed there were two noticeable spikes in demand for BNPL, first during the March lockdown and then in November around Black Friday. That trend continued in the lead-up to Christmas.

Centrix chief operating officer Mark Rowley said another spike was expected on Boxing Day.

While paying through BNPL platforms were most popular among 18-24 year olds, consumers over the age of 40 had shown the greatest uptake year-on-year, Rowley said.

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Centrix chief operating officer Mark Rowley says another spike in people using buy-now-pay-later to shop is expected on Boxing Day.

A survey of 1000 customers carried out by Kiwi BNPL firm Laybuy found one in five shoppers said they were doing their Christmas shopping using BNPL.

Laybuy managing director Gary Rohloff said most young respondents also said they planned on spending less than $600 on Christmas presents this year.

“Covid-19 has hit workers in New Zealand’s tourism, hospitality and retail sectors particularly hard, and these are the sectors where disproportionate numbers of younger people tend to be employed,” Rohloff said.

Rohloff said Laybuy experienced stronger-than-expected growth throughout November, exceeding forecasts with gross merchandise value up 220 per cent year-on-year.

A survey of 1000 customers carried out by Kiwi BNPL firm Laybuy found one in five shoppers said they were doing their Christmas shopping using BNPL.

Compared to October, the number of purchases made using Laybuy in the month of November increased by 33 per cent.

Rowley said the average value of BNPL purchases, on average, was about $300 or less.

BNPL was most popular among shoppers in Gisborne, the Bay of Plenty and in the Waikato, according to Centrix.

Consumer NZ head of research Jessica Wilson said consumers should be wary of using buy now pay later services as defaulting on fees could lead to a bad credit score.

NZ Post business marketing general manager Chris Wong said many people had shopped for their Christmas presents online during the November sales.

Online shopping resulted in record-breaking Christmas deliveries. NZ Post was delivering 2 million parcels a week in the lead-up to Christmas.

This was similar to the number of parcels NZ Post processed following the move from Level 4 into Level 3 earlier in the year, Wong said.

In the two years to November, the Commerce Commission received 18 complaints about BNPL companies, ranging from delays in refunds, to overcharging, late fees and information about outstanding payments being misleading.

Rowley said consumers needed to be aware of late fees and the ability to pay the amount in full.

He said the industry was putting together a code of conduct for them to follow, and further regulation could come.

Consumer NZ head of research Jessica Wilson said using BNPL could leave a black mark on shoppers’ credit files if they defaulted on paying the late fees, as this was passed on to a debt collection agency.

The Australian Securities and Investments Commission found one in five BNPL users missed payments, half of users aged between 18 to 29 cut back on essential items to make repayments, and more than 1.1 million transactions in 2019 incurred multiple missed payment fees.

Its review also found the revenue that companies earned from late fees had risen 38 per cent last year.

Wilson said shoppers using BNPL platforms did not have the right to a “cooling off” period, which applied to other credit purchases.

“These schemes aren’t covered by the Credit Contracts and Consumer Finance Act so the protections that apply when you’re using other forms of credit aren’t available,” she said.