Buy now pay later (BNPL) is gaining prominence and emerging as an alternative credit tool for consumers in Australia, with tech-savvy millennials especially using the service, finds GlobalData, a leading data and analytics company.

BNPL provides consumers with the flexibility to pay for their purchases at later dates with low or no-interest, making it a lucrative payment tool.

Ravi Sharma, Lead Banking and Payments Analyst at GlobalData, comments: “The COVID-19 has adversely affected the consumers’ disposable income, creating a demand for short-term consumer financing. The increasing demand for credit coupled with growing consumer preference for e-commerce has made the BNPL service as one of the preferred short-term borrowing tools among the consumers.”

According to GlobalData’s 2021 Financial Services Consumer Survey conducted online in Q1-Q2 2021, 36% respondents in Australia indicated using BNPL service for buying goods and services in the past six months.

BNPL payment model has gained significant traction in Australia with large number of payments and fintech companies looking to get a slice of this market. Afterpay is the leading BNPL brand in Australia, with global sales of US$21.1bn during the year ended 30 June 2021, registering a year-on-year growth of 90%. Its active customers rose to 16.2 million by June 2021, up by 63% compared to June 2020.

According to GlobalData’s 2021 Financial Services Consumer Survey, Afterpay is the most popular BNPL brand in Australia with 49% respondents preferring this brand, distantly followed by Zip with 13% share.

While Australian BNPL market is occupied by established providers such as Afterpay, Zip, and Openpay, new players are entering the market. In July 2021, PayPal joined the list by launching its ‘Pay in 4’ buy now pay later service in Australia which allows customers to pay for purchases in four installments.

Klarna, which entered Australian payment space in December 2020, had already registered over one million app downloads by September 2021 with its customers making payments at over 25,000 merchants.

Sharma concludes: “With the country recovering from COVID-19 pandemic, BNPL presents huge potential in Australia. Rising consumer spending, high consumer preference for electronic payments, and proliferation of BNPL providers will support growth of BNPL business model.”