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Highlights
- NZ’s BNPL sector has delivered strong growth in 2021 with the number of active customers doubling in the last 2 years.
- Though BNPL providers do not charge any interest on credit, there can be heavy fees if instalments are missed.
- Consumer NZ is calling for the regulation of the BNPL sector to safeguard customers from irresponsible lending.
The BNPL industry has been growing rapidly and is set to surge due to its ability to offer flexible payment options for purchases made by consumers.
The sector gained momentum during the COVID-19 pandemic, strengthened by the flexibility and ease of interest-free payment plan options amid a change in consumers’ payment preferences post pandemic.
A look at NZ’s BNPL sector
NZ’s BNPL sector has delivered strong growth in 2021 with the number of active customers doubling in the last 2 years.
The industry has grown in popularity because it provides consumers with immediate access to products and services at a supposedly reduced price by focusing on the first payment rather than the whole cost with no interest or fees.
Source: © Robwilson39 | Megapixl.com
As per the 2022 Global Payments Report by Worldpay from FIS, NZ’s e-commerce market will grow 8% through 2025 to reach US$8.5 billion with BNPL likely to comprise 17% of e-commerce transaction value by the period.
Humm, Zip, AfterPay, Laybuy, Openpay are some of the BNPL providers in NZ.
BNPL can result in debt and financial hardships for consumers
However, there are certain challenges that the sector is vulnerable to. As consumers get the goods upfront with payments to be made in instalments, BNPL providers do not charge interest but there can be heavy fees if instalments are missed.
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Gemma Rasmussen, Consumer NZ head of campaigns and communications, stated that there was no legal requirement for BNPL lenders to ensure that their loans were acceptable and affordable for their consumers.
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There have been increasing concerns that vulnerable consumers can be left out by the lack of protections, leading to debt spirals and financial hardships.
The NZ government had requested a feedback on relative benefits and costs of BNPL in November 2021.
Call for regulation of BNPL services
These issues have prompted consumer advocates from nine countries, including NZ, to team up to target legal ambiguities that enable businesses to avoid credit regulation.
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Consumer NZ is calling for the regulation of the BNPL sector to safeguard customers from irresponsible lending. The organisation has written to David Clark (NZ’s Consumer Affairs Minister) requesting the Government to supervise these services.
The global consumer alliance wrote an open letter to regulators, making the below-mentioned demands.
- BNPL products should be regulated in the same manner that other types of credits are.
- Make it mandatory for retailers to offer a payment choice that lets customers pay for a product fully during a purchase.
- Require BNPL providers to consider if providing credit to consumers is appropriate and affordable without creating financial damage.
- Make it unlawful for BNPL providers to sell their goods to children or persons in financial distress.
- Provide fair and impartial channels for customers to seek justice when anything goes wrong.
- Make sure regulators examine and inform how the product is affecting different consumers.
Bottom Line
Global pressure to apply to responsible lending requirements has grown strongly with vulnerable consumers falling into insurmountable debt because of a lack of protection on BNPL services.
