Debit cards and laybuy - the new ways many are paying

Thursday, 4 March 2021

Debit cards and buy now, pay later are increasingly the young person’s payment mechanisms of choice.

Kiwis are increasingly opting for debit cards at the cost of credit cards, as new forms of payment begin to take hold.

According to ANZ's latest financial wellbeing indicator, the percentage of New Zealanders using a debit card increased from 34.9 per cent in December 2016, to 39.5 per cent in June last year.

Conversly, the use of credit cards dropped from 58.4 per cent to 55.3 per cent over the same period.

Ben Kelleher, ANZ’s managing director of personal banking in New Zealand, said that while the appetite for credit appeared to be largely unchanged, “the way we are doing it is changing”.

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Young people in particular had embraced debit cards to help them stay within their means.

Laybuy, a buy now, pay later company originally from New Zealand, has branched out into the UK and Australia.

“The good thing about debit cards is you only spend what you have, so they do appeal to people who might be wary of debt.

“If they're a scheme card –a Visa or Mastercard –then you can effectively use them like a credit card, you can do online shopping, you can go onto your banking app and block them. The functionality is very similar between debit and credit cards.”

The bank’s November wellbeing indicator also showed that since Covid, more people with credit cards were clearing them. There was a 12 per cent increase in the number of customers who paid off their card in full each month.

In terms of financial resilience, New Zealanders had an average of $42,417 per head in savings as of June last year.

Although the figure looked high, it was impacted by people with large amounts of savings. The median figure was $5,580 a person, compared to $4,810 12 months earlier.

New ways to pay

Kelleher said the decline in credit cards was only half the story, as other new forms of payment took off.

Buy now, pay later schemes such as Afterpay were becoming widespread, and a host of biometric payment tools such as voice authorisation were around the corner.

Biometrics have been introduced in many areas of life, such as biometric bag drops at airports. In New Zealand banking, it’s largely restricted to voice so far.

ANZ itself had nearly 900,000 customers registered for voice biometrics, which was very secure and meant people could skip security questions.

'”You could see a future where biometrics in the light of some forms of payment could be useful as well.

“Maybe that's with tapping your finger on some sort of terminal - although you may not want to do that in a Covid world - or maybe it's using voice to pay at a terminal rather than having to use your card.

“Certainly the whole payment space in New Zealand to some degree, but certainly overseas, is moving really fast. I think we can all expect to see a lot of innovation in this space.”

Convenience was a big driver. A recent survey by global fintech firm FIS found 17 per cent of Australians would even consider putting a microchip in their arm to speed up payments. In China the figure was closer to 49 per cent.

Kelleher thought that was less likely here. “I think you wouldn't need to use a chip.”

The FIS survey also showed how popular buy now, pay later had become in Australia. Thirty five per cent of people were likely or highly likely to use the scheme for a small purchase, under $A375 (NZ$402.72), falling to 27 per cent for a bigger transaction (over A$1500).

Mobile wallets like Google or Apple Pay were becoming ubiquitous, and almost a quarter of Australians were already using or interested in making voice payments.

Forty per cent were keen to have voice in-car payment solutions for paying while driving.

One element of the buy now, pay later craze that concerned Kelleher was that young users may not realise it was still a form of credit.

“You're taking the service but not necessarily paying for it upfront.

“I think there's a growing appreciation for that across jurisdictions overseas and it's something I know that in the UK, for example, regulators have started to look at that and put some perimeters around making sure the customers know what they're getting into when they do take out a buy now, pay later service.”

And it was possible those regulations could come to New Zealand, as banking regulation here often followed what had happened in the UK and Australia.

Kelleher said he'd like to see that, “not for any patch protection reasons” but because it wasn't in anyone's interest for someone to put something aside and realise they couldn't afford it later.