Innovation, Disruption and Consumer Harm in the Buy Now Pay Later Industry: An Empirical Study

Abstract

‘Buy now pay later’ (‘BNPL’) has been described as ‘an Australian fintech growth story’, an innovative and disruptive financial product that has fundamentally changed the global market for consumer credit. Providers assert that BNPL promotes financial inclusion, allowing consumers to avoid the fees and interest associated with other, more expensive financial products. Yet critics maintain that BNPL is too readily accessible and that it can cause serious hardship, particularly for low income earners. This article is the first scholarly empirical study to focus on low income earners’ use of BNPL. It draws on a series of focus groups with consumer advocates and an online survey of consumers who have used BNPL, either alone or in conjunction with payday loans or pawn loans. Drawing on this data, the authors evaluate the Australian Government’s current proposal to regulate BNPL more stringently. They outline the benefits and possible risks associated with this proposed reform, which will require BNPL providers to comply with ‘tailored’ responsible lending obligations under the National Consumer Credit Protection Act 2009 (Cth).

Keywords: Buy-now-pay-later; consumer protection; consumer law; financial products, payday lending; pawnbroking