As lawmakers debate possible methods of regulating the buy-now-pay-later (BNPL) sector, a new report has shed light on the sector’s significant contribution to the local economy.

The Australian Finance Industry Association (AFIA), which boasts Afterpay, Zip, Humm and the big four banks as members, has published a study detailing the “vital” role of the BNPL sector in the Australian financial ecosystem.

Notably, AFIA’s findings revealed that the BNPL sector contributed more than $14 billion to Australia’s GDP in the 2021 financial year, despite accounting for less than 0.5 percent of payment transactions across the economy.

The report also showed that BNPL's current 5.9 million Australian users were responsible for over $11.9 billion in transactions in FY21.

AFIA further reported that BNPL supported 99,200 jobs during the period under review and led to an increase of $2.13 billion in overall gross revenue for traders. Additionally, AFIA reported that $102 million in interest was saved by consumers by using BNPL instead of credit cards.

Commenting on the report's findings, Diane Tait, chief executive of AFIA, said "the facts speak for themselves".

“The research shows that consumers are choosing BNPL to help them budget and manage their money the way they want. Retailers use BNPL to help them grow their businesses and participate in the digital economy,” said Ms Tate.

"BNPL has been really important to consumers and retailers, especially during the COVID-19 crisis, and continues to be an important option."

The research is derived from quantitative surveys of over 2,750 consumers and over 700 merchants conducted by RFI Global in December, January and February 2022.

Informed understanding is critical to regulation

In response to mounting calls for regulation - which recently included Financial Services Minister Stephen Jones confirming his government would press ahead with plans to bring the BNPL sector under credit laws - AFIA stressed that an "informed understanding" of the sector was critical to safeguarding the conditions for a future-proof financial services ecosystem.

"AFIA looks forward to working with government, regulators and consumer groups on solutions that will work best and be embedded in the BNPL Code," Ms Tate said.

She claimed that "AFIA's BNPL Code of Practice protects consumers".

"Only 0.01 per cent of customers needed an AFCA to help resolve their complaint with their BNPL supplier last year and only 0.34 per cent of customers had hardship agreements," Ms Tate said.

Welcoming the report, Zip co-founder and global COO Peter Gray said: "This report underlines what we have long known, BNPL is a key contributor to the Australian economy and the benefits it provides to consumers and merchants cannot be overlooked." .

"BNPL creates jobs, gives consumers better options, saves them money and helps support and grow Australian retailers," Mr Gray added.

AFIA's BNPL Code of Practice came into force on 1 March 2021.

Describing it as a "world first", Ms Tate said at the time that the key aspect was safety for consumers.

“From the outset, strengthening consumer protection across the sector has been a focus for AFIA and its BNPL members. The Code is specifically aimed at consumers and has nine commitments that signatories make directly to the people who use their products and services.

Maja Garatsa Djurdjevic

Maya's career in journalism spans more than a decade in finance, business and politics. Now an experienced editor and reporter in all elements of the financial services sector, before joining Momentum Media, Maya reported for several established news outlets in South East Europe, looking at key processes in post-conflict societies.