Buy now, pay later (BNPL) has become a wildly popular financial movement, but some institutions are countering this potentially debt-rearing trend by offering digital savings schemes.
There were almost six million active BNPL accounts in Australia, totalling around $12 billion in transactions, according to the latest research and survey data released by the Australian Finance Industry Association (AFIA) for the 2021/22 financial year.
AFIA survey results revealed that nearly two thirds (60%) of merchants claimed that their revenue would fall if they stopped accepting BNPL and predicted they’d lose, on average, almost one quarter (24%) in revenue if BNPL wasn’t available or the business model was fundamentally changed.
Over 135,400 merchants accept BNPL payments. While this financial model seems to be a boon for retail businesses, is it a safe spending strategy for Australian consumers?
Banks pitching an alternative approach
Neobank Up - an independent subsidiary of Bendigo and Adelaide Bank - this week launched Maybuy, a save now, buy later (SNBL) feature for its digital banking app. Customers select items they plan to buy and the app creates an individual savings plan for each product.
Once you’ve reached your savings goal for a particular item, the app sends a notification informing the user that it’s now affordable to make the purchase, should you still want to.
The innovation was spurred on by a survey, commissioned by Up, that found more than half (57%) of young Aussies expressed interest in a savings-based alternative to BNPL. More than one quarter (27%) of respondents said they had made BNPL purchases they later regretted and an even greater number (29%) said BNPL makes them feel stressed.
Up has more than 500,000 customers and one quarter (25%) are under 25 years of age.
As the cost of living increases as a result of staggering inflation, people are seeking to employ smarter financial practices as a means of saving money and generating affordability.
In the United States, Accrue Savings offers a similar SNBL scheme but theirs is tied to an online marketplace where retailers and merchants compete for consumers by offering rewards and discounts on intended purchases.
Here’s how it works… shop for the item/s you wish to buy; create a savings plan with a merchant; hit your flexible savings goals to earn cash rewards; invite family and friends to crowdfund your purchases; and when you’ve reached your savings goal make your obligation-free purchase.
With the big four banks tipping more interest rate hikes to come, you may be wondering if it’s better to get a term deposit or ride out the rising rates with a high interest savings account?
Complacent savers are potentially missing out on hundreds of dollars in interest, as the gap widens between some of the highest and lowest savings rates on the back of the RBA hikes.