According to recent figures from Centrix, a credit bureau in New Zealand, 10.5% of buy now, pay later (BNPL) accounts had missed their payments in March 2023.
But Centrix is working to combat this issue through a new initiative, PayWatch, and is working with several BNPL providers, including Afterpay, Zip, and Laybuy.
The initiative involves a credit reporting system that informs BNPL providers if customers are behind on repayments. This data sharing between providers would give a more accurate view of a consumer’s indebtedness status and reduce the number of people going further into debt.
While the current Comprehensive Credit Reporting (CCR) system—similar to FICO scores in the U.S.—supports traditional credit products and their monthly payment cycles, PayWatch captures BNPL repayment performance on a daily basis. It provides BNPL providers with a more accurate view of someone’s credit risk, enabling them to better manage any potential issues and flag any customer who is behind on their payments.
In recent years, BNPL schemes have gained tremendous popularity across the globe, allowing customers to purchase goods and services via interest-free installments. However, as the number of people using these services has surged, so have the concerns about the impact on consumers’ financial wellbeing. The PayWatch initiative is a positive step towards addressing these concerns, as it promotes responsible lending and helps to protect vulnerable consumers.
“We’re glad to see these providers taking steps at responsible lending practices,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “Managing risk is one of the important parts of credit lending and BNPL providers will need to continue to take risk aversion seriously if they want to remain in business for the long term.”
Looking ahead, we’ll likely see more initiatives aimed at promoting responsible lending and improving consumer protection in the BNPL sector. As consumers become more aware of the potential risks of using BNPL services, there will be a growing demand for transparency, accountability, and regulation within the sector.
It’s also important that BNPL providers work together with regulators, credit bureaus, and other stakeholders to ensure that their services are used responsibly and don’t leave consumers worse off.
