Buy-now-pay-later offerings have seen phenomenal uptake over the past year, new research suggests, while businesses can expect to see fewer credit card transactions.
The data from market researcher Roy Morgan has shown that 1.95 million Australians have used buy-now-pay-later digital payments methods, such as Afterpay or Zip Pay, in the year to September, up by 41 per cent on a year prior.
Meanwhile the percentage of Australians holding a credit card is down by 3 percentage points over the last year.
The decline in credit card usage has fit into a long-term trend showing reduction in credit card debt over the last decade, the report noted, with it now sitting at $7 billion compared to $8 billion in 2007.
Roy Morgan chief executive Michele Levin said the payment landscape in Australia is facing rapid change, with buy-now-pay-later providers likely to pose a threat to traditional deferred payment options.
“The increasing use of new payment technologies is being aided by the growing proliferation and development of smart phones and wearables with integrated technology such as Apple Pay and Google Pay,” Ms Levin said.
“Consumers will come to expect the minimum effort when making payments and the industry will need to adapt by providing more innovative and simpler solutions.
“Traditional financial institutions may need to collaborate with fintechs and other third parties to keep up with the fast-moving digital payment environment.”
Yet while the growth in buy-now-pay-later usage has been rapid, overall user numbers remain relatively low. Only 9.4 per cent of the population was recorded using them, up from 6.8 per cent a year before.
Even among the heaviest user group, those aged 25-34, only 17.4 per cent are using the payment methods.
Australians between the ages of 14 to 34 account for the majority (55.9 per cent) of buy-now-pay-later users, with those in the 25-34 group making up 33.5 per cent of all users.
That age group represents only 18.1 per cent of the population over 14, Roy Morgan noted, meaning the 25-34 cohort is nearly twice as likely to use a buy-now-pay-later system compared to the average across the whole nation.
In contrast, Australians over the age of 50 make up only 14.2 per cent of pay-later users despite being 40.7 per cent of the population over the age of 14. For Australians aged over 65, usage is below 1 per cent.
Consumers using the systems tend to be lower earners, gaining an average or relatively low wage. Around 11.7 per cent of users earn between $40,000 and 49,999, compared with 8.8 per cent of Australians overall.
While 4.4 of the overall population are in the most cashed-up income group, earning $150,000 a year or more, only 2.2 per cent of buy-now-pay-later users fall into that salary bracket.