If existing Afterpay customers want to raise their spending limit, they will also be required to have a credit check.
The company is not required to verify customers’ declared income. Saadat said this reflected the spending limits it offered, and the fact it would be doing a credit check on customers. Afterpay currently has credit limits of $3000, or $4000 for people who request an increase.
Loading
Zip, a rival BNPL firm, said its Zip Pay product would now be regulated, while three other products it provides are already regulated. “Zip welcomes the new buy now, pay later legislation in Australia and the introduction of these standards, which are aligned with Zip’s existing practices,” a Zip spokesperson said.
Afterpay, the biggest BNPL firm in Australia, was formed in late 2014. It expanded rapidly, with digital payments surging as online shopping boomed during the COVID-19 pandemic, before being bought by Block in a deal that valued Afterpay at $39 billion at the time.
Banks have also sought to copy the BNPL model, with Commonwealth Bank launching its own product in 2021 and investing in Swedish BNPL firm Klarna.
While consumer groups have long accused BNPL firms of exploiting loopholes in the credit laws, Labor last year said its BNPL laws sought to balance consumer protection, innovation and competition.
The chief executive of the Consumer Action Law Centre, Stephanie Tonkin, said the new regulations would result in a “very light touch” credit approval process for people seeking less than $2000. “I think we will continue to see plenty of buy now, pay later facilities being approved up to $2000,” she said.
Commonwealth Bank launched its own BNPL product in 2021.Credit: Eamon Gallagher
“It’s a very, very common form of credit. It’s always been very accessible. Now we are going to see some level of checking and verification of affordability.”
Afterpay on Tuesday released research it commissioned, which showed its customers had an average credit score slightly lower than that of credit card applicants, but higher than personal loan applicants.
Payments expert Lance Blockley, managing director at The Initiatives Group, said the new regulations would probably have a limited impact on Afterpay and Zip in the short term because the changes applied to new customers, rather than existing customers.
“Everybody who wants to have a BNPL account in Australia has probably already got one. It’s like closing the stable door after the horse has bolted,” Blockley said.
BNPL firms were more focused on signing up more Australian merchants to accept BNPL payments, he said, as well as expanding in the more lightly regulated US market.
