Consumers deserve more payment choice at the checkout: etika

Consumers deserve more payment choice at the checkout: etika

By Robert Schuijff (pictured), CEI, etika.


Consumer credit has taken on many forms over the years – credit cards, personal loans and store credit being some of the commonly used methods to finance big and small purchases.

The dawn of fintech and easily integrated APIs have revolutionised the availability of consumer credit at the checkout, with buy now, pay later (BNPL) gaining traction as a flexible and convenient online and offline payment alternative across all income groups and demographics.

Australian consumers were some of the earliest adopters of the BNPL payment method globally, and during the pandemic, uptake has accelerated to the point where BNPL has caught the interest of traditional financial firms and banks looking for gateways into the sector. This has been done either by offering their own services or partnering with existing players – the acquisition of Australia’s Afterpay by Square being a prime example.

Statistics show that BNPL has not lost its appeal to consumers and merchants alike – according to data from the Reserve Bank of Australia, the number of active BNPL accounts in Australia rose from five million to seven million between 2021 and 2022, and collectively, BNPL users spent A$16 billion, an increase of 37%. With the pandemic behind us, POS finance usage continues to grow strongly, and is set to account for about $438 billion by 2025, or 5.3% of global e-commerce transaction value.

A big driver of this trend is that traditional credit products don’t necessarily suit modern consumers who increasingly expect more flexibility and convenience from the array of payment products available. Younger people in particular are turning away from credit cards as a result. The world of work is changing too – the growing numbers of retirees, ‘deskless’ freelancers or temporary contract workers might not fit traditional lending criteria imposed on them by mainstream banks and may find it more difficult to access affordable credit.

Right now, there are around three million Australians who don’t have access to a moderate amount of credit. In fact, young people, migrants and low-paid workers are found to be particularly vulnerable to financial exclusion. Of the three million Australians who don’t have access to a moderate amount of credit, more than one in three are aged 18 to 24 and four in 10 are employed.

There are many causes of financial exclusion, and the unfavourable approach of mainstream banks and financial services providers towards people without credit records behind them is a big part of it. There are hundreds of thousands of creditworthy consumers who cannot access finance because of strict lending criteria that doesn’t take into account their individual circumstances and their ability to repay.

Fintechs are some of the most innovative businesses operating today – so it’s no surprise that there is a huge focus to innovate to make access to alternative finance easier and more flexible than their traditional counterparts. By doing so, they have given consumers more choice.

The state of regulation right now – and where it may be headed

If consumers are to be empowered with more informed purchasing power and alternative ways to pay, it’s vital that they, merchants, and other payment players understand how potential forthcoming regulatory changes might impact them – and to understand the differences between BNPL and other popular forms of credit.

In Australia, BNPL has so far not been regulated in the same way that credit cards and other credit products have been under the National Consumer Credit Protection Act 2009 and National Credit Code. BNPL has experienced significant criticism by not being regulated, and a number of people have gotten themselves into hardship.

In November 2022, the Australian Treasury released the ‘Regulating Buy Now, Pay Later in Australia’ Options Paper, asking for submissions regarding possible regulation of the sector. The Treasury paper outlined three options for better regulating BNPL services, including by treating them the same as credit cards under the National Consumer Credit Protection Act.

If BNPL comes under the remit of the National Credit Act, all providers will be required to tighten up lending criteria, conduct more affordability checks, offer hardship support for those who can’t make timely repayments, and other consumer protection measures. No responsible provider would argue with those practices.

If regulators restrict availability to alternative forms of finance under ‘one-size-fits-all’ credit laws, they could actually risk reducing consumer choice, and force shoppers to turn to more costly forms of lending, something which would be entirely at odds with what consumer groups advocate for.

The call for financial inclusion

At a time when economic volatility, surging living costs and inflation continue to cause havoc in household budgets, it’s more important than ever for consumers and merchants to have access to alternative and more affordable ways to pay. Financial inclusion should also mean enabling people’s access to affordable credit when they need it most. Illness, divorce and other life-changing circumstances mean people may have to seek more flexible finance offerings that allow them a clear view of their budgets, and at lower cost than credit cards with high-interest rates, or personal loans with stringent repayment timeframes and conditions.

Consumers deserve more choice in payment methods beyond the BNPL and traditional consumer finance offering, from responsible providers that have always strived to conduct themselves fairly and transparently. This is where etika comes in.

etika’s entire focus is making finance more accessible and affordable, with fairness and transparency embedded in everything we do. We pride ourselves in being upfront and clear with our customers. We don’t cloak credit agreements with confusing jargon, and we aren’t interested in chasing profits at the expense of good relationships.

etika is not just here to be another payment option. We want to make a positive impact in the world of finance, enable financial inclusion and become a tool for financial wellbeing.