Afterpay is aiming to enter the Australian supermarket sector as recent regulatory changes have imposed stricter controls on buy-now, pay-later (BNPL) services. With new laws aligning BNPL platforms with the regulations governing credit card companies and lenders, Afterpay’s co-founder, Nick Molnar, believes this shift will encourage prominent retailers like Woolworths, Coles, and Aldi to accept BNPL payments.
Currently, Afterpay is already being accepted at select IGA and Drakes supermarkets. However, experts are cautioning against the implications of using BNPL for grocery shopping. UNSW finance expert, Andrew Grant, pointed out the risk of overspending when consumers have the option to pay in instalments. He worries that this could lead to financial difficulties if shoppers routinely exceed their budgets.
Domenique Meyrick, co-CEO of Financial Counselling Australia, echoed these concerns, warning that using BNPL in supermarkets may lead to unnecessary debt accumulation. She mentioned that many individuals are already struggling with multiple BNPL loans, indicating a potentially precarious financial situation for some consumers.
Historically, BNPL services have been predominantly utilised for larger purchases, such as electronics, allowing shoppers to stretch the cost over several payments. However, the ongoing cost-of-living crisis has many resorting to BNPL for everyday essentials due to a lack of readily available funds. Previously, acquiring a BNPL service was relatively straightforward, requiring minimal information from users. Now, these providers will perform thorough assessments on an individual’s financial situation—including income and existing debts—before approving loans.
This regulatory scrutiny also means BNPL platforms will report users’ repayment histories to credit bureaus, which could adversely affect future access to credit cards or loans. Molnar believes that this regulatory framework will grant BNPL services more legitimacy in the eyes of major supermarkets, facilitating their integration into everyday spending decisions.
Despite the current interest in Afterpay by retailers, not all are eager to adopt the service. Woolworths has been non-committal, indicating they have nothing to announce at this time, while Coles and Aldi have outright stated they do not plan to implement Afterpay. However, experts suggest that retailers might reconsider if they can negotiate more favorable conditions for accepting BNPL payments—currently costing merchants between 2% and 8%, which is significantly higher than the 0.5% to 2% fees for credit and debit card transactions.
Concerns over reputational risks and the potential impact on consumers’ financial health are significant barriers. While larger supermarket chains have not officially accepted BNPL payments, a workaround exists: consumers can purchase gift cards for these supermarkets through various BNPL platforms to pay for groceries.
According to research from Compare Club, nearly 31% of participants utilise BNPL services for essential items, including food and fuel, although a larger share (66.67%) primarily reserves it for discretionary purchases such as clothing and gifts. Alarmingly, approximately 25% of users report owing between $1,000 to $5,000, and 20% admitted to incurring late fees regularly.
As the BNPL sector evolves under increased regulation, the future integration of these services into Australian supermarkets remains uncertain, with ongoing debate about the financial wellbeing of consumers taking precedence.
