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BNPL operators such as Afterpay have grown strongly in recent years: the government has said there are about 7 million active accounts in Australia.
The BNPL code was introduced in 2021, and the review backed its over-arching commitments – which include being “fair, honest and ethical”, dealing fairly with complaints, and making sure BNPL services are “suitable” for customers.
About 7 million accounts are registered to use buy now, pay later services.Credit:Natalie Boog
But the review said the key challenge for the BNPL firms was translating these commitments into “meaningful actions that support better customer outcomes in a practical sense”.
“On this point, whatever principles and promises a code may contain, it is the application of these in practice that will determine whether a code is effective. Our review found that there is significant room for improvement on this front,” it said.
The review was led by a former deputy chair of the Australian Securities and Investments Commission, Peter Kell, who was also former head of consumer group Choice.
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Australian Finance Industry Association chief Diane Tate said the industry supported all the review’s recommendations, pointing out the code was still in its early days.
“The government and Promontory’s independent review have both identified an important and ongoing role for the code,” Tate said.
The federal government has also vowed to introduce regulation of BNPL products, with Treasury proposing three options for the sector. They include: stronger self-regulation; limited regulation under the Credit Act; and more comprehensive regulation under the Credit Act.
Valuations of BNPL businesses have plunged since 2021 amid a broader slump in the tech sector, and regulation remains a key issue that could impact the sector.
Shares in Afterpay rival Zip Co rose 3.7 per cent to 56¢ on Thursday, as the company said it would receive about $20 million after closing deals to sell its businesses in Central and Eastern Europe and South Africa.
The company has been selling assets to become profitable earlier than previously planned, and Zip chief executive Larry Diamond said Zip remained confident it would hit its profitability targets.
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