Does 'booze now, pay later' lead to a financial hangover?
With major players such as Apple launching a buy now pay later (BNPL) product, there are renewed questions about the potential harms for people who use instant credit to pay for alcohol.
A research team from Deakin University's School of Psychology is currently investigating whether BNPL schemes, introduced into Australian pubs and clubs last year, are associated with an increased risk of harm, including 'financial hangovers', when compared to payment by other means such as credit cards.
Dr Hannah Bereznicki, a researcher in Psychology's Centre for Drug, Alcohol, and Addiction Research (CEDAAR) and the Centre for Social and Early Emotional Development (SEED) said there may be harmful consequences associated with using BNPL schemes for alcohol.
"While we know that many people use BNPL services responsibly, for some it is a recipe for financial difficulty," Dr Bereznicki said.
"When it comes to on-premises consumption, people are more likely to make their purchasing decisions while intoxicated, which could lead to poor decision-making, such as over-spending and over-consumption.
"These schemes work because they allow consumers to obtain a product or service immediately, then pay back the loan in instalments. The loans are interest-free, but there can be hefty fees and penalties applied to late or missed payments. More recent BNPL schemes do not have fees, but they still encourage people to over-commit financially."
Research by the Australian Securities and Investments Commission (ASIC) found more than 60 per cent of people report spending more money when they use BNPL schemes, as these are often spontaneous purchasing decisions. The same study found that 16 per cent of BNPL users have put off other bill payments, become overdrawn, or sought to borrow money due to overspending on BNPL platforms.
ASIC also found that young adults, who are more likely to be financially vulnerable, are the main consumers of BNPL and people in the 18 to 34 year old age bracket are most likely to be hit with late payment fees.
"BNPL is unregulated credit, meaning that financially vulnerable people may be more likely to access a loan than use credit cards, and they will receive less protection if they do get into financial difficulty.
"We also know that some people resort to paying off their repayments with high-interest credit which drives them further into debt," Dr Bereznicki said
Most licenced premises using the BNPL option to sell alcohol are in Melbourne, Sydney, Brisbane, and Perth. Alcohol home delivery paid for via BNPL operates Australia-wide and some rapid home delivery services also offer BNPL.
Director of CEDAAR and study investigator Professor Peter Miller said that low-cost alcohol increases consumption, which in turn increases the risk of alcohol-related harms.
"Injuries, assault, and emergency department presentations are linked to alcohol consumption," Professor Miller said.
"If alcohol is perceived to be cheaper due to payment instalments, people may drink more than they intended and could be at greater risk of experiencing these harms."
The research team is looking for participants, aged 18 years or older, who live in Australia and are interested in taking part in this national online study.
Further information is available on the study's plain language statement via bit.ly/boozenowpaylater_deakinresearch or email firstname.lastname@example.org.