Australian customers using buy now pay later schemes could soon be slugged a fee


Consumers who use buy now pay later schemes including Afterpay and Zip Pay could soon be slugged a fee to use the increasingly popular payment method in line with a Reserve Bank of Australia decision.

In a blow to the burgeoning sector, the RBA on Friday said BNPL operators should no longer be allowed to bar retailers from passing on the cost of participating in the schemes.

In December 2020, the RBA governor, Philip Lowe, said that despite their rapid growth “BNPL operators in Australia have not yet reached the point where it is clear that the costs arising from the no-surcharge rule outweigh the potential benefits in terms of innovation”.

 The Afterpay logo in a store window. The RBA has cleared the way for retailers to pass on the cost of using buy now pay later schemes to customers.

But on Friday, in a paper issued as part of a review of payments regulation, the RBA’s payments board said BNPL was “now used by a significant number of Australian consumers particularly for online purchases”.


BNPL was “significantly more expensive” for merchants than other payments including credit cards but had “become an essential payment offering” for many retailers.

“Accordingly, it is now likely to be difficult for many businesses to decline to accept BNPL services, even if they wanted to, and the high cost of these services is pushing up their payment costs,” the reserve bank said.

Changes to the law would be required to implement the RBA’s recommendation. The bank said it would “continue to work with Treasury in an effort to put in place regulatory arrangements that are competitively neutral, put downward pressure on merchants’ payment costs and promote efficiency, innovation and competition in the payments system”.

Analyst Grant Halverson, a former banking and credit card executive, said the fees BNPL operators charged merchants ranged between 4% and 6%, meaning that based on an average purchase price through Afterpay of $150 customers could expect to pay an additional $6 to $9.

He said the RBA’s research showed 60% of consumers said they would switch away from BNPL if they were slugged with a 4% surcharge.

“A 60% potential reduction in sales/revenue for BNPL is catastrophic – nothing short of life-changing for all these fintech start-ups as [they] would need new revenues quickly,” he said.

Consumer groups welcomed the RBA’s decision, saying the move would better inform people about the cost of BNPL services.

“The truth is these costs have been hidden from users of buy-now-pay-later credit products for far too long,” Gerard Brody, the chief executive of the Consumer Action Law Centre, said.

“People should be able to choose not to be burdened by the cost of this payment system, which can be especially expensive for retailers.”

Credit card operators have been subject to rules forcing them to allow merchants to charge surcharges to recover the cost of participating in their schemes since 2003.

An Afterpay spokesperson said the company was surprised by the move.

“The only thing that has changed … is that the BNPL industry has become more competitive – which makes the RBA’s latest position on this issue even more surprising,” the spokesperson said on Friday. Potential surcharges were “not anticipated to have a material impact” on the company.

A Zip Co spokesman, Matthew Abbott, said the company would engage with Treasury about the RBA’s recommendations.

“Zip has always said our model is very different to cards because we provide many different services to merchants, most crucially marketing and customer leads,” he said. “Our position was always that surcharging was a private commercial matter negotiated between Zip and merchants.”

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