In recent years, we’ve seen the launch of several buy now, pay later service providers offering consumers an easier and alternate way to pay for discretionary goods and services.
These booming BNPL products are gaining popularity at an astounding rate, with the number of transactions increasing from 16.8 million in fiscal year 2018, to 32 million over the 2019 financial year, according to the latest figures released by the Australian Securities and Investments Commission.
That represents an increase of 90 per cent.
Consumer awareness of BNPL products surged after Afterpay (ASX: APT) launched in 2015 and steadily disrupted layby services and the role of credit cards for consumers. Since then, we’ve seen the sector grow to include competition from a number of existing groups and newcomers, including ZIP (ASX: Z1P), Payright (ASX: PYR), Laybuy Group Holdings (ASX: LBY), Zebit (ASX: ZBT), Sezzle Inc (ASX: SZL), Openpay (ASX: OPY), Splitit (ASX: SPT), QuickFee (ASX: QFE), and Humm (ASX: HUM).
While these providers have received criticism for the potential negative impacts on creating debt and charging late fees, there is no denying that they have disrupted the market to give consumers what they want – a more consumer-friendly credit product. Gone are the days of lay-by where consumers had to secure items through a lengthy deposit process and wait months for a product.
With competition only ramping up, these players have been forced to differentiate themselves by tailoring their offerings to specific sectors or geographies. Some are focusing on establishing themselves in certain locations, while others are making a name for themselves within niche purchase categories to gain a stronger position in the market.
These offerings have only just scratched the surface of payment innovation. The pay later category has the potential to make a much bigger impact, and there is one area that is poised to break into the mainstream very shortly. Enter the next wave: bill now, pay later.
Same acronym, but focus is bills
Afterpay has shown that people want flexible payments and appreciate the structure of a payment plan aligned to their cash flow. This can also work for bills.
Our company Deferit – which saves consumers the hassle of seeking a bill extension if they are going to be late on a payment – is already making a mark in this space by paying bills on time and on behalf of consumers for a fixed Netflix-style subscription fee. The platform allows customers to pay off their monthly bills in four instalments and charges no interest or late fees.
Demand for our solution – which doesn’t fund discretionary purchases like many BNPL providers – has skyrocketed 150 per cent in the past 12 months, with customers using the service to manage bills such as for their phone, electricity, internet or car registration. To date, more than half a million bills have been paid using the platform we developed, totaling over $100 million and has saved its users from over $10 million in late fees.
Deferit offers consumers a central platform to manage their budget and bills without the stress of late payments or calling multiple billers for extensions. The platform is empowering users to set their own due dates for their bills around life circumstances.
The impact of the coronavirus pandemic has accelerated the need for a shakeup in the fintech space, as many cash-strapped Australians look for better ways to manage their money. In due course, billers are going to recognise solutions like Deferit as a legitimate and must-have payment method for offering customers payment flexibility and a better way to pay.
Jonty Hirsowitz is the co-founder and CEO of Bill Now Pay Later platform Deferit.