New rules loom for buy now, pay later sector

“We want innovation, we want people to have access to these great products but we want to ensure that there’s proper guardrails in place,” Jones said.

BNPL, which includes market leaders Afterpay and Zip, has quickly become one of the most popular ways to buy goods and services.

According to figures released by the RBA which looked at transactions in the first six months of 2021, the value of BNPL transactions was the equivalent of 1.7 per cent of Australian card purchases, with providers processing around $11.5 billion.

BNPL isn’t regulated in the same way as credit cards, and the vast majority of its users are aged under 35.

The report found 20 per cent of people had cut back or gone without essentials such as meals because they’d overspent.

Others had missed major bills, including household payments and mortgages.

Jones is concerned some of the seven million BNPL customers hold multiple accounts, leaving them vulnerable to spiralling debt.

It is estimated that there are almost 20 BNPL services in the Australian market offered by more than a dozen providers.

Read Related Also: Prince Harry And Meghan Markle's Netflix Documentary Just Broke A Record

“There is a small percentage of the market where people are getting into hot water,” he said.

The government wanted to introduce credit checks for those signing up to BNPL platforms, Jones said.

“We don’t want to see people in the same situation they were in the bad old days of the credit market where they might have had five, six, seven or eight credit cards.”

Caught in a “credit downward spiral”, people were unable to pay off large debts and punishing late fees.

Last year, the Australian-founded Afterpay was snapped up by Twitter founder Jack Dorsey’s Square for $39 billion.

Since then, Afterpay’s shares on the ASX have plunged by almost half.