Special Report: The BNPL sector has shown that it’s here to stay, so it’s time for the sector to get serious about ‘fit for purpose’ regulation, says Zip Co’s Managing Director ANZ, Cynthia Scott.

Buy now, pay later (BNPL) is here to stay. Since storming onto the retail scene, BNPL has challenged the credit card market by offering better solutions for consumers and cementing itself in the mainstream payments ecosystem.

After nearly a decade in Australia, now is the time to raise the bar on standards within the BNPL industry. Zip welcomes Treasury’s soon to be released options paper which, according to media reports, is likely to include models for compulsory affordability and credit checks for customers.

Zip supports fit for purpose regulation. We have always operated above the minimum standard required, and as the industry grows and matures, it is important that appropriate guardrails are in place to ensure consumers are protected, and innovation and competition against long-standing incumbents are not stifled.

We know the sector is expanding, with a recent report from the Australian Finance Industry Association, BIS Oxford Economics and RFI Global showing 48% of BNPL users do not own a credit card.

The report, based on data from the eight largest BNPL players, said that more than half of customers preferred BNPL over credit cards because they pay no interest.

It also said that in 2021, consumers saved a total of $102 million in interest through using BNPL instead of credit cards.


Code of Practice

Zip participated in drafting the BNPL Code of Practice in early 2021. It created a minimum standard in a range of areas such as capping late fees, freezing accounts for customers that are late repaying, requiring membership of a dispute resolution scheme and having a mechanism for assessing suitability.

The Code sets a minimum standard for providers, but it is a minimum and, at Zip, we’ve always gone above and beyond that threshold. And now with BNPL well and truly established in Australia, the time is right for the rest of the sector to raise the bar, providing consistency, visibility and transparency for customers and stakeholders.

In 2019, Zip put forward a number of recommendations to the Senate which addressed what we have always believed to be a fit for purpose regulatory framework.

These included recommendations that all BNPL credit providers should hold an ASIC credit licence, should perform credit checks on new applicants, and that all BNPL products that offer purchasing capacity over $2,000 should be subject to strict affordability checks.


Customer Credit

We conduct credit and affordability checks on our customers to ensure our products are appropriate, and as a result we have very few customers in arrears or hardship, and generate less than 1% of our revenue from late fees.

Our BNPL business model is not based on interest charged to customers or people falling behind. Zip is steadfast in its belief that customers should only buy now if they can pay later, and our credit assessment processes support this view.

We hold an ASIC credit licence and our Zip Money product – which makes up nearly half of our receivables in Australia – is regulated under the NCCPA. We adopt similar standards and use a similar onboarding process for our Zip Pay product, which involves a credit check, ID check and assessments of banking transactional data which provides us with a view of the applicants’ income and expenditure.

BNPL is an Australian innovation and with UK, US and NZ regulators also considering regulatory changes to the industry – and that means Australia has an opportunity to lead the way and create an appropriate framework that ensures consumers feel safe no matter which payment option they choose.


This article was developed in collaboration with Zip Co, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.