More Australians Rely on Buy Now Pay Later Services to Cover Essential Expenses Amid Financial Struggles

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In an unsettling sign of the times, an increasing number of Australians are turning to Buy Now Pay Later services to put food on the table and fuel in their tanks, revealing the harsh reality of financial struggles households across the nation face.

In the face of rising living costs and inflation, an increasing number of Australians are turning to Buy Now Pay Later (BNPL) services to meet essential expenses such as food and petrol, according to a recent survey conducted by Financial Counseling Australia. 

The survey, which involved more than 500 financial counsellors, sheds light on the desperate economic situation many households are experiencing, prompting them to resort to alternative payment methods.

A Growing Trend of BNPL for Everyday Items

Financial counsellors expressed their growing concerns about using BNPL services for everyday items. The survey reveals that over 80% of the counsellors reported clients using BNPL for general retail purchases. However, what stands out is the significant proportion of individuals utilising BNPL for necessities.

Essentials Covered by BNPL

The survey highlights that 71% of clients rely on BNPL services to cover their food expenses, while 41% use this payment method to manage the increasing petrol costs. The reliance on BNPL for such essential items underscores the financial strain a substantial portion of the population faces.

“BNPL was never intended to pay for everyday living expenses,” commented Fiona Guthrie, Chief Executive of Financial Counseling Australia. “But the ease of accessing BNPL loans, combined with mounting cost-of-living pressures, has meant more people are resorting to it just to get by,” she added.

Utility Bills and General BNPL Usage

Further findings from the survey indicate that nearly one-third of clients are now using BNPL services to pay their utility bills, showcasing the breadth of essential expenses covered through this payment method. 

Additionally, 93% of financial counsellors noted a general increase in clients using BNPL across various categories.

Government Regulations Aim to Protect Borrowers

Recognising the potential risks associated with BNPL usage, the federal government unveiled May to protect high-risk borrowers. The regulations require BNPL providers to obtain a credit license, which aligns them with other lending services. Moreover, these providers must adhere to minimum standards and hardship requirements and face marketing restrictions akin to other credit products.

Calls for Responsible Lending Obligations

Amidst the rise in BNPL usage, there are growing calls for implementing income verification and credit checks. Financial experts suggest that larger BNPL loans should also be subjected to responsible lending obligations to prevent debts from snowballing, which could lead to an increased demand for financial counselling.

“With BNPL so hard to keep track of, debts can easily snowball, leading far more people to seek financial counselling,” warned Fiona Guthrie.

As the cost of living and inflation continues to rise, the survey’s findings highlight the concerning trend of more Australians turning to BNPL services to cover essential expenses such as food, petrol, and utility bills. 

While the convenience of BNPL has made it popular for general retail purchases, financial experts are increasingly calling for responsible lending practices to avoid potential debt traps for vulnerable individuals. 

The federal government’s regulations aim to balance facilitating access to credit and safeguarding borrowers, but the industry’s ongoing consultations may shape the future of BNPL services in Australia.

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