We’ve recently written about how the Buy Now, Pay Later (BNPL) is experiencing a bit of trouble, not only as vendors are laying off staff, but also with more scrutiny over regulations.
In a recent post by Dan Bradley, Director of AlphaLab at Principals, the BNPL space is experiencing some hardships in Australia as well.
Similar to what others are seeing globally, the service—which encourages consumers to split their purchase into smaller installment payments—has put many in debt and that debt continues to rise. According to Bradley, brands and retailers need to be more responsible in outlining how BNPL will impact consumers if they choose to go that route.
“People across Australia are beginning to struggle with the financial hangover,” wrote Bradley. “Many are looking at the brands involved in a new light.”
“Now that BNPL is firmly entrenched in the retail model, it’s going to be hard to separate the impact on your bottom line from the impact on your customers. But if you want to have a sustainable business model, you need to do exactly that,” he added. “Start by talking to your customers. Are the majority using BNPL services responsibly? It’s all too easy to overextend yourself at the mere click of a few buttons, especially if you aren’t financially savvy.”
In a recent article, Ben Danner, Research Analyst at Mercator Advisory Group, also alluded to the growing concerns that are happening within the BNPL space.
“We’ve taken a cautiously optimistic stance on the product since the beginning but have always advised that it’s not sustainable for a business to lend credit without regard to credit portfolio quality. Just as we have advised credit card issuers, BNPL providers must tighten their portfolios and be careful not to overextend in a turbulent market. Short-term gains could cause major long-term losses,” Danner said.