Afterpay enters Aussie pubs, experts warn of “debt spiral”
Afterpay – the popular buy now, pay later (BNPL) service – has made the jump from retail stores to over 160 Aussie pubs.
But consumer advocates are worried that the move could send some people into a “debt spiral”.
Australian Venue Co (AVC) has become the first hospitality group to partner with Afterpay as part of its ‘Dine Now, Pay Later’ offering – which rolls out across its venues from November 15.
AVC CEO Paul Waterson said the decision was driven by customer demand, who he said have shifted away from credit cards, as well as a desire to offer convenient experiences for guests,
“We’re not afraid to go first. As a group, we seek out other industry leaders who we can work with to innovate on behalf of our customers,” he said.
“We are looking forward to our guests being able to choose an alternative, innovative way to pay for dining out at our pubs.”
However Katherine Temple, the policy and campaigns director at the Consumer Action Law Centre, said the centre has seen more people struggling with BNPL debts, making the move from AVC all the more concerning.
“Often buy now, pay later is part of a larger debt so people are also struggling with existing credit card debts or personal loans or utility loans, so it’s rarely the only type of debt when they come to us,” she told news.com.au.
“The debt varies but it can be [from] a couple of thousand dollars up to tens or hundreds of thousands of dollars of debt and we are hearing from people of all ages and walks of life that are using these products now.”
James Hunt, a policy advisor at Financial Counselling Australia, told Good Food that Afterpay and other BNPL companies aren’t required to check if customers can afford the repayments, “so unfortunately many people are ending up with unmanageable debt”.
Ms Temple shares those concerns, citing a lack of safeguards “to ensure people can afford to make repayments”, which she says exacerbates “financial hardship and money problems”.
“Buy now, pay later is everywhere now and is normalising debt particularly for younger people,” she said.
A spokesperson for Afterpay said the company enters new consumer markets based on demand.
“As credit cards steeply decline, Australians are looking for smarter ways to manage their budget, using their own money, and avoiding interest and debt traps,” they said.
They also said the Afterpay’s product has built-in spending rules to ensure customers don’t pay interest or revolve in debt.
“Customers are unable to continue using Afterpay if they are late on a single instalment,” they added.
However, customers do pay some fees if they miss a payment, with Afterpay collecting a whopping $70 million in late fees in 2020.
The Australian Securities and Investments Commission (ASIC) also criticised Afterpay, Zip, and other BNPL providers for charging excessive fees.
In a report released last year, the regulator found that one in five BNPL users are missing payments.
It also found that 15 percent of users had taken out additional loans to pay for the services.
As for Afterpay’s place in pubs, chief spokesperson for CANSTAR Steve Mickenbacker said it could be especially challenging to navigate.
“You visit a pub, perhaps budgeting to buy two drinks … BNPL puts you in a position to turn those two drinks into eight,” he said.
“Without self-discipline, that two-beer pub trip could become a six-week hangover.”
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