Major changes coming to Afterpay – see why an expert welcomes the app’s updated rules as ‘sensible’

Major changes have been made to Australia’s most popular Buy Now Pay Later (BNPL) service, Afterpay, with one expert welcoming the adjustments as ‘sensible’.

Under Afterpay’s terms of service, all customers can now choose which day of the week their installments will be debited from their account.

Currently, the day of purchase automatically becomes the day on which all future biweekly payments are based.

In another change, select customers will have the option to delay their first payment for eligible orders by up to two weeks.

In an email to all customers, Afterpay announced that ‘more customers’ can now take advantage of the benefit.

Australian shoppers have embraced Buy Now Pay Later (BNPL) schemes, but according to Finder, 20 percent of consumers have paid a late payment penalty since March this year (stock image of shoppers)

“We can decide whether to grant you access,” the agency said.

‘We take several factors into account when making this decision, including how long you have been with Afterpay and your payment history.

‘We may deny access if you have not paid on time or if we otherwise reasonably have to do so.’

Afterpay said the change allowing customers to choose which day their payments should be made was aimed at helping consumers manage their “finances more efficiently”.

Even if customers don’t choose a preferred payday, the customer will be given a default payday, but they can change it.

Andrew Grant, associate professor at the University of Sydney Business School, said 7 News he believes this change is a “sensible option,” as long as customers opt for the day on or shortly after they get paid.

“A major reason for missed payments – which incur both dishonor fees and late payments – is due to mismatched payment cycles,” he said.

Mr Grant said it will “reduce the risk” of Afterpay trying to collect money via direct debit when people are low on cash before payday, adding that it should help customers budget.

An expert said the change to Afterpay – where consumers can choose which day they want their payment deducted – will help Australia’s budget

But Mr Grant noted that the option to delay the first payment for up to two weeks will likely require customers to undergo a credit check before being eligible.

‘In the case of low-risk consumers – either identified by their credit history, or a track record of good payment history with Afterpay – offering the option to defer the first payment by up to two weeks would be similar to other forms of credit,” said Mr. Grant.

The associate professor said there may be a greater risk of “larger” bad debts, such as customers now defaulting on 100 percent of payments instead of 75 percent.

Aussies are expected to earn A$25.8 billion in payments on BNPL services by 2024

But Mr Grant said these bad debts could be offset by acquiring more customers and by carrying out careful credit checks by the company.

According to Findertwo in five Australians (40 percent) had used a BNPL service in the period from October 2023 to March 2024.

“Gen Z and millennials are the most likely to use BNPL services, with 52 percent and 59 percent using BNPL respectively (March 2024 data),” the report said.

As of March this year, as many as 20 percent of BNPL users have paid a late fee – up from just five percent in 2020.

Australians have embraced BNPL’s services – and now generate billions of dollars in transactions every year.

Payments are expected to reach A$25.8 billion by 2024 Yahoo.