The buy now, pay later industry, including Zip (ASX: Z1P) and Afterpay (ASX: APT), faces a ‘Code of Practice’. The share prices of Zip and Afterpay are up.
Zip and Afterpay are two of the largest buy now, pay later (BNPL) providers in Australia. They allow customers to spread out the cost of purchasing items over a number of instalments. The BNPL industry is adding customers and merchants to the system at a fast rate.
What Was Announced Today
Zip said in an announcement that it welcomes the news that a buy now, pay later industry Code of Practice will be released for public consultation in January 2020.
Zip co-founder and Chief Operating Officer Peter Gray said: “The Code is still a draft but it is intended to show our sector is mindful of its responsibilities to consumers and spells out minimum standards of how this fast-emerging industry should conduct its business.
“Australians are increasingly turning away from credit cards and embracing BNPL offerings. What we offer is a simple and transparent payment method that is interest free.”
This new code is a recommendation of the Senate Economics Committee’s February 2019 report ‘Credit and financial services targeted at Australians at risk of financial hardship” and is being developed by the Australian Finance Industry Association (AFIA), which Zip described as the leading voice of a diverse industry on behalf of the BNPL industry.
Zip said that it thinks this code is a strong starting point, but it will keep implementing its own “more robust and consumer-focused standards” which Zip believes delivers better outcomes for customers.
The higher standards Zip is referring to is based on its technology to verify an identity and then making sure customers can afford repayments.
Mr Gray concluded: “Since we started, Zip has performed credit and identification checks on every application. Our business model does not rely not late payment fees and, in fact, only one in 100 Zip Pay customers pay a late fee in any given month, compared with one in six credit card customers that struggle with repayments.”
