Outstanding payments for products that buy now and pay later are now the fourth most common type of consumer debt, and new research shows it is held by nearly one in five Australians.
About 18 percent of property owners buy now, pay later (BNPL) debt in the March quarter, according to the latest the NAB Economics Consumer Insight Report.
BNPL ranks fourth as the most common debt, after credit cards (held by 41 percent of consumers), home loans (34 percent) and personal loans (19 percent).
On average, Aussie consumers now have 1.8 BNPL accounts each. About half (51 percent) have one account, three in 10 (31 percent) have two accounts, and 12 percent have three. Nearly 5 percent of consumers have four or more.
But the bank noted potential issues around individuals collecting accounts.
“Because BNPL services are currently not required to hold a credit license and are not subject to consumer protections under the National Consumer Credit Protection Act 2009, concerns have been raised that multiple accounts could leave the most vulnerable consumers struggling to manage multiple payments (also potentially affect their credit scores and the ability to take out credit or loans in the future),” the NAB Consumer Insight Report noted.
CBA chief executive Matt Comyn has also previously suggested that the BNPL market should be held to similar regulatory standards as other lenders, despite the bank backing a number of players in the space and launching its own product.
NAB’s investigation comes after ASIC published findings in November that 22 percent of BNPL customers prioritized paying off this debt over paying off loans or bills.
The regulator had found that 21 percent of BNPL users had missed a payment in the previous 12 months and that 5 percent had missed mortgage payments to pay off their BNPL debt.
The new NAB survey found that BNPL debt was much more widespread among consumers under 50, with about one in four people aged 18-29 (26 percent) and 30-49 (24 percent) being in debt, compared to just 5 percent among older than 65 years.
The payment method was also more common among lower-income earners (earning less than $35,000 a year). But the survey found no clear pattern between debt and income, with the highest number of consumers (21 percent) with BNPL debt earning between $50,000 and $100,000 per year.
Nearly four in 19 (37 percent) consumers with a BNPL loan had missed a payment. Young men (18-29 years old) were overrepresented, 59 percent missed a payment.
More than four in ten men ages 30-49 (44 percent) and 41 percent of women ages 18-29 had also reported lack of payments.
BNPL was most likely used to buy clothing (45 percent of all consumers) and large household items such as furniture and appliances (40 percent). About 16 percent of Australians used BNPL to spend on their children, 14 percent for cars and 12 percent for food.
Other common uses were beauty and hair (12 percent), travel and vacations (10 percent), entertainment (10 percent), jewelry (10 percent), telecom-related products such as telephones and internet (10 percent), sporting goods or ‘other’ items ( 7 percent).
Of all types of debt, payday loans caused the most stress for their holders (65.8 points out of a possible 100), followed by loans from family and friends (59.8 points), personal loans (54.1 points) and investment loans (51, 1 points).
Stress was lowest for credit card debt, despite being the most held (53.9 points), followed by BNPL (46.1 points).
But young men in the 18-29 age group reported much higher levels of stress about BNPL debt (62 points), in addition to men aged 30-49 (53.9 points) and women in the 18-29 group (48, 4 points).
[Related: ASIC wants non-bank data]
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Sarah Simpkins is the news editor of Mortgage Business and The Adviser.
She previously reported about banking, financial services and wealth for InvestorDaily and ifa.