Buy now pay later giants Afterpay and Zip are unlikely to face more regulatory challenges despite government research showing one in five customers of such providers miss payments.
That is the view of RBC Capital Markets analyst Tim Piper after the Australian Securities and Investments Commissions on Monday published a research report on the burgeoning sector.
Vendors such as Afterpay and Zip have had meteoric rises on the share market, but the possibility of regulatory action to protect consumers remains a threat to the businesses and investors.
ASIC found the new wave of credit providers was increasingly popular. Australians had more than 6.1 million accounts as of June 2019, representing up to 30 per cent of the adult population.
The amount of credit provided almost doubled for the 2018-19 financial year.
Yet the financial crimes watchdog had cause for concern. It found one in five customers had missed or were late in paying other bills so they could service debts to buy now pay later providers.
Half of these customers were between 18 and 29-years-old.
Providers are also collecting more in missed payment fees. ASIC looked at six providers' revenue of this type and found it increased by 38 per cent to $43 million from the 2017-18 to 2018-19 financial years.
ASIC's analysis was based on figures from Afterpay, Brightepay, Humm, Openpay, Payright and Zip.
The ASIC report made no recommendations or conclusions. It said regulation was a matter for government.
Mr Piper believed the customer hardship figures in the report had not changed much from a previous ASIC one in 2018.
He noted the ASIC report showed the rate of transactions being charged missed payment fees had been stable for the last two years.
Mr Piper believed that bodes well for payments providers.
"We do not see adverse changes for Afterpay and Zip Co," he said.
Both vendors greeted the findings of the ASIC report.
Afterpay said customers were suspended from its service if they miss a payment.
It also said it earned 85 per cent of revenue from businesses selling goods to shoppers.
Zip co-founder Peter Gray said only one in 100 Zip customers were late in paying each month.
He credited this to software which could assess a potential customer's suitability.
ASIC recognised efforts were under way to ensure buy now pay later providers better assess and respond to customers.
Vendors are developing a code of conduct, and as part of wider industry regulation from October next year will have to identify the category of consumers they are targeting with products.
The federal government is also reviewing regulations for the Australian payments system to ensure it supports innovation.
Buy now pay later vendors will contribute, and a report is due next year.
