Buy Now Pay Later (BNPL) use by households has dipped during the COVID-19 pandemic while credit card usage has held steady at much higher levels, according to new research from ME.
Only 13% of Australians said they used BNPL services during the six months to June 2020, down from 16% during the six months to December 2019.
Credit card payments are still the main consumer payment method after cash – 46% of respondents had borrowed on credit cards over the past six months, unchanged from the previous survey.
“It doesn’t matter how innovative the lending method is, most Australians are wary of getting into more unsecured debt in the midst of a global and domestic economic crisis,” ME general manager for personal banking, Claudio Mazzarella said.
“BNPL certainly hasn’t replaced the credit card yet. Credit card usage is holding steady while BNPL is dropping. Most Australians are financially savvy. They know spending is spending, and debt is debt. Many households have taken a severe financial hit to incomes and been forced to cut back on spending, or they’re prudently waiting to see how this pandemic plays out before borrowing more.”
ME data suggests that the typical BNPL user is female, Gen Z or Gen Y (aged between 18 and 24 or 25 and 34, respectively), holds less than $1,000 in savings, is a student, part-time employed or unemployed, is receiving some form of government assistance and is renting or if they own a home, the property is valued at $300,000 or less.
“The average Buy Now Pay Later user is younger and less financially comfortable. They may be wary of credit cards in general or unable to qualify for a credit card,” Mazzarella said.
These were key findings collected as part of ME’s latest Household Financial Comfort Report conducted in June.