BNPL: What’s the Catch?

Ally Feiam By Ally Feiam | 02 Oct 2019

Online marketplaces and brick-an-mortar retailers are embracing BNPL like never before. As a new platform arrives on the scene, retailers snag the opportunity to partner up. But are there some downsides that we’re all ignoring?

Another BNPL partnership is in the works, this time with Catch Group and LatitudePay. The online marketplace will introduce the payment platform to its 1.5 million shoppers, with the option to pay for goods over a ten-week plan. LatitudePay launched only a month ago and has already signed up many other retailers to its belt, who will go live within the next few weeks.

“Catch Group is an incredibly successful and entrepreneurial online retailer. It has been about 1.5 million active customers, and at any time almost 1.9 million different products for sale on its site at great prices,” explained Ahmed Fahour, the Managing Director and CEO of LatitudePay.

With aims to get a head start of the holiday period, LatitudePay will go live on the Catch site in October. The BNPL platform has an ‘instant’ approval for spending amounts between $150 and $1,000.

The partnership with LatitudePay and Catch allows customers to schedule payments at their preferred time. “We’re excited to be partnering with LatitudePay to provide our customers with more choice and value when it comes to choosing how they pay. LatitudePay allows our savvy Catch.com.au shoppers to spread payments over ten weeks and responds to the growing demand we’ve seen for buy now pay later services. LatitudePay is a great partner for Catch.com.au as we are both aligned to help make online shopping easier and more convenient for shoppers,” said Nati Harpaz, the CEO of Catch Group.

The Marketplace x BNPL Trend

Many online marketplaces in Australia have embraced the trend of BNPL, as have Aussie shoppers. In August, Kogan partnered with Citi to create a bespoke BNPL service – with a survey declaring that over half of customers preferring to use a payment plan from a bank rather than a ‘non-traditional’ lender.

“We know 78 per cent of surveyed Australians are concerned about their debt, and through both our shop with points and instalment offers, we aim to give our customers choice when it comes to how they want to pay for their purchases,” explained Chong You Lum, the Head of Cards and Loans at Citi.

Other online marketplaces like MyDeal also embrace scheduled payments, as they signed up with ZipPay in 2018 – one of the hundreds of participating stores registered.

The trend for this payment plan is exceedingly popular throughout retail in Australia, with 90 per cent of Aussie shoppers using BNPL on subsequent purchases. According to the Power Retail Spotlight Series: BNPL, only 17 per cent of Australians online shoppers use these scheduled payments regularly, but that number is set to rise.

“The younger generation is particularly concerned about debt, with 87 per cent of millennials identifying themselves as concerned. This generation is also the primary user of buy now pay later services, reflecting their willingness to use new tools for money management,” explained Mr You Lum.

BNPL Over-Saturation?

While BNPL services are exceedingly popular within the Millennial generation, with every new platform that arrives on the scene, the harder is for customers to keep up.

Is it becoming the case of over-saturation for retailers and customers alike? According to the Power Retail Spotlight Series: BNPL, 97 per cent of online shoppers are aware of Afterpay and 64 per cent have heard of Zippay. However, whether shoppers have heard of a BNPL platform and if they’ve used it are two very different statements.

Trust is something that’s harder to capture in today’s climate. In June, it was uncovered that BNPL services like AFterpay, Zip and Splitit fall through the cracks when it comes to credit provider classification. Some BNPL platforms are not regulated or covered by the National Credit Act, which can spell trouble for consumers.

With more services that show up on the retail scene, the harder it is for customers to keep up with what they’re using. This can lead to confusion, missed payments and underlying debt.

According to a study by ASIC (Australian Security and Investment Commission), 60 per cent of BNPL users are aged between 18 to 34, and 40 per cent of those users earn less than $40,000 annually.

The study found that users of the platform are 70 per cent more likely to make a spontaneous purchase, which is a win for the retailer, not so much the consumer. Sixty-four per cent of those surveyed found they would be more likely to spend more than they intended in a single transaction, and 16 per cent had either become overdrawn or delayed a scheduled payment due to BNPL debt.

While these legal loopholes stay in plain sight, it may seem like an easy money-maker for retailers, but consumers may catch on to the downsides of the payment plans. Until then, the more BNPL platforms that op up, the more likely retailers are going to jump on the bandwagon.

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