“I use Afterpay fortnightly, sometimes weekly, to purchase sale items, and recently to help me set up my new apartment,” she says. 

For Belinda, using BNPL allows her to manage and forecast purchasing, without incurring the interest she’d otherwise accrue using a credit card. 

“I use it to my advantage to support my cash flow and budgeting, but I think users need to be informed of, and cautious about, incurring late fees if they don’t pay on time.”

Belinda is typical of a new wave of consumers, with millennials comprising more than 30 per cent of BNPL global traffic share, in an already booming market. 

The COVID-19 pandemic has further propelled the rapidly expanding market, as consumers of all ages are forced to turn to online shopping and e-commerce options. 

BNPL on the rise

According to a recent analysis by Similarweb, traffic to BNPL sites rose by 59 per cent between the first half of 2020 and 2021, as consumer purchasing behaviour adapted to restrictions and lockdowns.  

The report showed Afterpay dominated the market, with a 77.3  per cent share of the Australian, US and UK markets, and a 34 per cent global increase in sign up traffic. 

According to The Next Gen Index, BNPL usage surged by 174% with Gen Z and 110% with Millennials since Jan 2020.

In contrast, credit card spending remained static across all demographics, falling by around 7% for Gen Z. 

The findings follow last week’s announcement that Square will acquire Afterpay for $39 billion, along with the arrival of a new BNPL player.  

The Commonwealth Bank is the first of the big four to try to lure back consumers with its own BNPL offering, StepPay. Joining a big list of new technology markets, such as Pay on Demand apps.

Like Afterpay, there are no additional costs to the customer as long as payments are made on time, and no ongoing fees. 

There are some differences through. Purchases are initially capped at $1000, and proof of either a regular income or despots into a CBA transaction account is required for eligibility. 

CBA says it will block additional transactions if a payment is missed to prevent customers falling into debt.  Late payers could be hit with a $10 late fee though, however that will be capped at $20 per purchase, and $120 per year. 

Can StepPay compete?

Whether or not there will be uptake, particularly among younger consumers who are already regular users of Afterpay, remains to be seen. 

For Soujanya Datta, 25, it would take a lot more than what StepPay is currenting offering for her to make the switch. 

“It’s capped at $1000, which is lower than my current Afterpay limit, and I doubt they would have any solid rewards,” she says. 

She’s also put off by the bank’s credit check requirement, prior to onboarding. 

“Not having to go through credit checks is very helpful when you want to add Gen Z to your customer base.”

For Belinda though, the idea of a $1000 cap is appealing, particularly if she were opening a StepPay account, on top of her regular Afterpay account. 

“I would not want more than $1000 on different accounts as it would become difficult to budget and keep track of my purchases and fortnightly payments. 

“I would probably use it if ANZ offered something or if I transferred all my business to CBA, because I like all of my finances to be in one place if possible. 

“It makes tax, tracking spending, and budgeting easier.  And after over committing myself in business a few years ago, I have shifted back to a very cautious approach.”

Fifty-year-old Catherine Cervasio agrees.

“I know I feel confident if I’m using a bank branded product, so if a bank I already have an account with extends their offerings to include a buy now, pay later service, I would be inclined to use it.
 

“It’s not always a great idea to have all your ‘eggs in one banking basket’ so again, if it was easy to switch and I wasn’t looking to do any lending, I’d be happy to switch to a bank provider.”

Photo source: Getty Images