The rise on BNPL (buy now pay later) apps have exploded over the last five years, with interest-free, take home lay-by options now readily available to almost anyone, sans the booklet of paperwork. But as these apps are specifically marketed at youth, the question must be raised as to how helpful they really are long-term.
Now we love a good Afterpay as much as the next guy here in the office, and as a bunch of youngsters ourselves, it’s easy to understand why. The appeal of BNPL is simple; with rising living expenses, increased housing prices and elevated education costs, Millennials and Gen Z are looking to save money or off-set their costs wherever possible. Shook? Not quite.
Millennials also seem to have a distrust for banks and credit cards, seeing them as risky and unnecessary. Because of this, the rate of young Australians who own credit cards has fallen by 17% over the last 14 years. Enter: Afterpay.
While obvious issues arise about young Australians getting themselves into debt, this study about young Australians’ financial management shows that 93% of all Afterpay transactions incur no late fees or penalties. It also reports that statistically, Australian millennials that use Afterpay actually earn more than people who do not use the app (intriggguinggg!).
So if the majority of Aussie youth are not racking up debt, then is there any noteworthy harm to them? The first obvious issue is Afterpay does not build a credit score. This can be seen as a positive, as a selling point of Afterpay is that it does not affect your credit. Of course as long as it is used responsibly; Afterpay do retain the right to report on negative activity to your account. While this may not seem like a current issue for most young people, the long-term effects may affect their ability to enter contracts that require a credit history in the future.
Looking at this report, we can see that millennials and Gen Z are being very cautious and aware of their money. However, there is an education issue involved in ensuring people know the effects of using apps like these. While Afterpay does not affect your credit score, it is still a legitimate line of credit, and does need to be claimed when applying for mortgages and home-loans. It also tells us that Australian youth have come to rely on a form of instant gratification as a result of these apps, which may affect their ability to reach long-term saving goals.
So while Afterpay no doubt can help Australian youth to afford and budget for their current lives, the long turn ramifications may outweigh its costs in the future.