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Buy Now Pay Later: Unveiling the Dangerous Debt Trend Engulfing Young Kiwis


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Young Adults Taking on Dangerous Debt through Buy Now Pay Later Schemes

New research conducted by the Auckland University of Technology has shed light on the concerning trend of young adults accumulating excessive debt through buy now pay later (BNPL) schemes such as Afterpay and Laybuy.

The Alarming Findings

According to the survey, which involved 705 young adults aged 18 to 34, the results indicate that thousands more individuals could be facing serious debt issues.

“Over 190,000 young Kiwis are likely to be either over-indebted or at severe risk of it,” warns co-author and senior lecturer in finance, Ayesha Scott.

Furthermore, the study revealed that buy now pay later services had a significant correlation with increased over-indebtedness, surpassing the impact of other forms of debt.

The Misconception of Debt

One concerning aspect highlighted by the research is that a significant portion of survey respondents, one in five, did not perceive buy now pay later arrangements as debt.

Services like Afterpay allow customers to purchase products in smaller instalments over a period of several weeks. However, this perception of installment-based payments as non-debt can lead to financial vulnerability and potential long-term consequences.

The Impact on Young Adults

For young adults, the allure of buy now pay later schemes can be enticing, offering the ability to acquire desired products without immediate financial strain. However, the consequences can be severe.

By accumulating excessive debt through these schemes, young individuals may find themselves trapped in a cycle of financial instability, struggling to meet their obligations and risking their long-term financial well-being.

The Need for Financial Education

Addressing this issue requires a multi-faceted approach. While buy now pay later services can provide convenience and flexibility, it is crucial for young adults to understand the potential risks and consequences associated with these schemes.

Financial education plays a vital role in empowering individuals to make informed decisions about their finances, enabling them to navigate the complexities of the modern financial landscape.

By equipping young adults with the necessary knowledge and skills, they can develop healthy financial habits, make responsible borrowing choices, and avoid falling into the dangerous cycle of over-indebtedness.

The Rise of Buy Now, Pay Later (BNPL) and the Need for Regulation

Buy Now, Pay Later (BNPL) services have gained immense popularity in recent years, offering consumers the ability to make purchases and pay for them in installments. However, concerns have been raised about the lack of regulation surrounding these services and the potential harm they can cause to consumers.

The Loophole in the Definition of Debt

According to financial expert, Sarah Scott, BNPL services have managed to escape regulation due to a technicality in the definition of debt. In order to be classified as debt, a financial obligation needs to extend beyond eight weeks and have an attached interest rate. Most BNPL providers have cleverly designed their repayment periods to be within six weeks and have eliminated interest charges, allowing them to market themselves as not being debt.

Scott argues that despite the technicality, if a financial arrangement looks like debt, it should be treated as such. The messaging and slick marketing of BNPL providers have successfully convinced consumers that they are offering something different, when in reality, they are still incurring a financial obligation.

The Impact on Consumers

A recent survey revealed that nearly 70 percent of respondents have used BNPL services at least once. While these services can be convenient, there is a significant portion of users (20 percent) who are utilizing them poorly. This includes incurring frequent late fees, prioritizing repayments over daily expenses, and even borrowing from other providers to repay their debts.

Scott believes that the current measures being implemented, such as credit checks on customers, are not sufficient to address the issues at hand. She argues that there should be affordability checks in place to ensure that consumers are not taking on more debt than they can handle. There is a need for greater oversight and more comprehensive regulation to protect consumers from the potential harm caused by BNPL services.

The Way Forward

Starting from September 2024, BNPL providers will be required to perform credit checks on their customers. While this is a step in the right direction, it is clear that more needs to be done. Scott emphasizes the importance of affordability checks and calls for in-depth regulation that goes beyond the current announcements.

It is crucial for consumers to be aware of the potential risks associated with BNPL services and to make informed decisions when using them. While the convenience may be tempting, it is essential to consider the long-term financial implications and ensure that the repayment terms are manageable.

As the popularity of BNPL services continues to grow, it is imperative for regulators to step in and establish comprehensive guidelines to protect consumers from falling into a cycle of debt. By addressing the loopholes and implementing stricter regulations, we can ensure that BNPL services serve as a helpful financial tool rather than a potential trap for consumers.

The Impact of Buy Now, Pay Later Services on Young New Zealanders

Buy Now, Pay Later (BNPL) services have gained immense popularity in recent years, offering consumers the convenience of making purchases without immediate payment. However, a recent survey conducted by Auckland University of Technology (AUT) has raised concerns about the negative impact of these services on young New Zealanders.

Raising Awareness about the Pitfalls

According to the survey, 190,000 young New Zealanders are facing financial difficulties due to their misuse of BNPL services. AUT researcher Dr. Claire Matthews emphasized the need to raise awareness about the darker side of these services.

“We’re really promoting and enabling what is a convenient tool at the direct expense of 190,000 young New Zealanders,” she said. “Those who are using it poorly and are getting into trouble with it, they’re why those protections are needed.”

Dr. Matthews believes that it is crucial for consumers to be aware of the potential pitfalls associated with BNPL services. She wants to ensure that young people understand the risks involved and make informed decisions when using these services.

Responsible Use and Mitigating Pitfalls

Laybuy, one of the leading BNPL providers in New Zealand, aims to address these concerns by promoting responsible use of their service. Gary Rohloff, the managing director of Laybuy, stated that they have always conducted credit checks on customers to ensure that the service is not available to everyone.

“We strongly believe that BNPL should be offered and used responsibly,” Rohloff said. “It’s for this reason we have always conducted credit checks on customers, meaning Laybuy isn’t available to everyone.”

Laybuy also restricts the use of their service for daily expenses such as groceries, fuel, and bills. They welcome the government’s commitment to introducing appropriate regulations for the BNPL sector and believe that raising industry standards is essential.

Questioning the Survey’s Credibility

Afterpay, another prominent BNPL provider, has questioned the credibility of AUT’s survey. A spokesperson for Afterpay pointed out that the survey’s sample size of 705 young adults is not nationally representative and may not accurately reflect the broader usage patterns of Afterpay.

“Surveying 705 young adults aged is neither nationally representative nor reflective of the way Afterpay is used, more broadly according to Afterpay data,” they said.

They referred to an August Cabinet paper by the Ministry of Business, Innovation and Employment (MBIE), which stated that it is challenging to establish a clear relationship between BNPL services and financial distress.

The Impact of Buy Now Pay Later Services on Financial Hardship

Buy Now Pay Later (BNPL) services have gained significant popularity in recent years, offering consumers the ability to make purchases and pay for them in installments without incurring interest charges. While these services have been praised for their convenience and accessibility, concerns have been raised about their potential impact on financial hardship.

Due to the relative newness of the sector and the difficulty in assigning causation, there is a lack of substantial quantitative data on the extent of financial hardship caused by BNPL services. However, it is important to examine the available information and consider the potential implications.

The Perspective of Afterpay

According to a spokesperson from Afterpay, one of the leading BNPL providers, the majority of purchases made through their platform do not incur late fees. In fact, they claim that 98 percent of purchases are made without any late fees, and 95 percent of payments are made on time.

Government’s Stance on BNPL Services

Commerce and Consumer Affairs Minister Duncan Webb has expressed his views on BNPL services and their regulation. He believes that these services should be exempt from affordability assessments, as they differ from traditional forms of lending.

Webb argues that BNPL schemes involve interest-free contracts for relatively small amounts of money, making them relatively low-risk for consumers. Requiring a full affordability assessment for such transactions would be disproportionate and could potentially limit access to this useful form of cheap credit.

However, it is important to note that Webb has not completely ruled out the possibility of further regulations in the future. He acknowledges that if evidence emerges suggesting that the current measures are not effectively addressing potential issues, further regulation will be considered.


While the impact of BNPL services on financial hardship remains a topic of debate, it is clear that there are differing perspectives on the matter. The lack of comprehensive data makes it challenging to draw definitive conclusions, but it is crucial to continue monitoring the situation and assessing the effectiveness of existing regulations.

As the popularity of BNPL services continues to grow, it is essential for regulators, industry players, and consumers to work together to ensure that these services are provided responsibly and do not contribute to financial hardship for individuals.

Tomas Hulman
Tomas Hulman
Tomas was born in Slovakia and went from being an untradeable computer scientist to first a fuel trader and later an algo trader who created strategies for automated stock trading. Now he is working with two eco-oriented projects and grinding his teeth for a big project in the media industry. You'll be hearing more from him...


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