Australia's increasing cost of living is pushing more people towards buy now, pay later (BNPL) services to manage their essential expenses. Originally marketed as a tool for discretionary spending on non-essential items like jewellery or camping gear, BNPL is increasingly being used by Australians to cover necessities such as electricity and groceries.
The National Debt Helpline has reported that calls related to BNPL debt have increased by up to 37% from the same period last year. This significant rise coincides with rapidly growing borrowing costs, high rental fees, and escalating food and energy prices affecting many households across the nation.
Australian-founded Afterpay pioneered the no-interest instalment payments model back in 2015. Since then, dozens of new players have entered this lucrative market offering similar services. While these companies promote themselves as convenient alternatives for customers making purchases they cannot immediately afford, concerns are rising about mounting debts among users who rely on them for basic needs.
Samantha Greenfield*, an Australian mother using BNPL services said: "I initially started using Afterpay for holiday shopping but soon found myself relying on it more frequently to cover necessary expenses like school supplies and utility bills."
The federal government is currently considering whether to bring the sector under its credit code regulations. However, most people argue that there must be a fair balance between stringent regulation and preventing unfair consumer fees.
Economist Richard Thompson* explained: "While regulation could provide some protection against reckless lending practices within this sector, we need to ensure that any measures introduced do not stifle innovation nor result in excessive costs passed onto consumers."
As Australians continue grappling with soaring living expenses amidst economic uncertainty due largely to factors beyond their control – such as supply chain disruptions caused by COVID-19 – it remains crucial for both government officials and industry leaders alike find ways protect vulnerable individuals without impeding access to financial services that can offer relief during these difficult times.
*Names have been changed to protect individuals' privacy.