Why we’re concerned about ‘buy now, pay later’ services

June 23, 2021

Over the past few years, we’ve noticed an increase in our clients using ‘buy now pay later’ (BNPL) services.

In fact, almost every client we have recently spoken to uses a BNPL service on a regular basis.

BNPL services have exploded into the markets leaving little time to consider its impact and how it should be appropriately regulated.

In New Zealand, 10% of all online purchases were made with some sort of BNPL app last year, according to the 2021 Global Payments Report released in March.

With BNPL services showing no signs of slowing down, we share a few of the reasons why we’re concerned.

No credit and affordability checks

Some BNPL services currently operate without needing to make credit and affordability checks to assess a consumer’s financial situation. This results in people already under financial pressure increasing their risk of falling into unmanageable debt.

Research has shown that most consumers do not view interest-free BNPL as a form of credit, therefore they don’t apply the same level of scrutiny.

No insight into hardship

If a consumer is regularly using services such as Afterpay to pay for groceries, it usually indicates the person is already in financial hardship and cannot meet the cost of day-to-day needs.

It risks putting consumers in a worse situation than the one they are already in.

If consumers are already stretched for cash and are committed to a repayment plan, it also means they have little to no money for emergencies – putting them at higher financial risk.

With several BNPL services expanding and offering their services for in-store purchases, the risk that consumers could take on unaffordable levels of debt is increasing.

Increased credit limits

Another concern for us is the automatic increase of credit limits.

Many BNPL services automatically increase credit limits based on repayment history and spending habits.

It rewards and then encourages consumers to keep spending money they don’t necessarily have.

One of our clients informed us that after they repaid $900 to Afterpay, they were immediately notified that their spend limit was increased to $1400 for future purchases.

Note that this is different to a credit card where banks are required by law to check affordability before approving credit card limit increases.

Hard to manage constant repayments

If consumers are using BNPL services often, particularly different services, it becomes harder to keep track and manage repayments.

It can result in consumers needing to make constant repayments which increases the risk of late fees.

Irregular purchases across different BNPL services can also lead to an increased repayment balance that is unaffordable on the day when consumers get charged – resulting in unavoidable late fees and insufficient money for essential needs.

Targeted advertisements

On top of increased credit limits, users who use the mobile application also get targeted promotional offers that aim to entice clients to make more purchases through the BNPL scheme.

The advertisements make it more challenging for consumers to break away from BNPL schemes.


BNPL can be a helpful way to manage finances, but we are concerned about its potential impact on consumers who are not financially secure.

Picture of Good Loans team

Good Loans team

Good Shepherd NZ

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