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05 Nov 2020

The Rise Of Buy Now Pay Later And The Future of Credit Cards

This is a guest post written by Peter Marshall, Banking and Product Data expert at

Unless you’ve avoided setting foot in a retail store or jumping online to do some shopping in the past few years, you’ve likely heard about the latest payment option in Australia: Buy Now Pay Later.

It’s safe to say that this is no longer just another financial buzzword, but a payment alternative that’s here to stay.

In fact, research published by Roy Morgan in March 2019 revealed that 1.59 million Australians made use of a Buy Now Pay Later service in the 12 months to January 2019.

Given the popularity of Buy Now Pay Later as a payment option, it’s perhaps unsurprising that a number of Australian banks are considering the best way to respond in the face of this new competition.

The result is that customers will wind up with a wider range of options, which is ultimately good news, as it gives them the opportunity to manage their money the way they want.

But where do credit cards sit in this future payment mix and could the Buy Now Pay Later phenomenon spell their death?

A changing payment landscape

Afterpay, Zip, bundll, humm. There’s been an explosion of Buy Now Pay Later services in Australia in recent years, but essentially they are just another option available for anyone wanting to defer upfront payment.

Unlike credit cards and other traditional forms of credit, the attractiveness of using a Buy Now Pay Later service lies in the fact that they don’t come with an interest rate and consumers can make fixed repayments on a fixed schedule - typically on a fortnightly or monthly basis.

Instead, consumers may have to pay flat fees, either to set up the service or as a penalty for making late payments. And missing payments may be easier than you’d think, with 30% of Afterpay users admitting to missing at least one payment according to a 2018 Mozo survey.

It might not come as a surprise, but younger Australians have been at the forefront of the Buy Now Pay Later revolution. As Roy Morgan revealed, millennials and Generation Z represented over 75% of the total market share according to their study.

The fast, simple nature of Buy Now Pay Later makes it an attractive payment option - both to consumers who are locked out or perhaps unaware of traditional forms of credit, or for debt-averse younger Australians.

That’s where banks comes in.

The popularity of Buy Now Pay Later has prompted banks to jump into the ring to ensure that they’re able to offer their own customers this flexibility as well, and they’re doing this in a number of ways.

Some are integrating existing Buy Now Pay Later services into their banking apps, while others are developing their own Buy Now Pay Later services or buying into existing ones.

A number of banks are even offering their customers the option of making their payments on certain products, like credit cards, in fixed instalments.

For example, Citi have already introduced a Fixed Payment Option which allows credit cardholders to choose between two different instalment plans for eligible purchases.

Cardholders are able to add instalment repayments on top of the minimum monthly repayment for terms of up to five years - all within their existing credit limit. These instalments will attract interest at a fixed rate and cardholders will still be able to keep their interest free days, if they're able to pay off their closing balance (not including the fixed payment option balance) in full each statement period*.

It makes sense for Citi and other banks to offer this kind of flexibility, especially for existing customers who like the convenience of having multiple repayment options in their pocket.

The bank has also partnered with online retailer to offer a buy now pay later service at point of sale, for Citi eligible cardholders who register their card with In this instance, eligible cardholders can convert their purchase to an instalment plan up to their existing credit limit, ensuring there is a responsible finance lens over the purchase. There is a flat fee transparently presented to the consumer at the checkout, which varies depending on the time period of the loan.

The future of credit cards

So on to the big question: do credit cards have a place in this new payment landscape?

The short answer is yes, they will.

There are still many situations in which a credit card could be a more suitable payment option. For example, shopping on overseas websites and at stores which don’t accept Buy Now Pay Later.

Of course, credit cards also offer a range of other benefits from the ability to accrue rewards points to in-built insurance and travel perks.

Rather than replacing them, it’s likely that Australians will simply make use of the payment option that best suits their situation and the particular purchase they’re making - whether that’s Buy Now Pay Later, a fixed payment option likes Citi’s or with a traditional credit card.

At the end of the day, it’s just fantastic to see more flexible payment options becoming available to Australians consumers which, when used responsibly, can help them pay and avoid debt.

*Eligibility and T&Cs apply.


Profile picture of author – Peter MarshallThis is a guest post written by Peter Marshall, Banking and Product Data expert at Peter Marshall is a banking and product data expert at financial comparison website For the past 16 years, he has been analysing trends in the financial industry and tracking interest rates to help Australian consumers stay informed. Peter is also one of Mozo’s expert judges, who conduct analysis of a range of Australian financial products and services for the Mozo Experts Choice Awards.