As pubs and bottleshops adopt buy-now-pay-later options, brewers and other producers are being called on to consider the implications of BNPL payments for their products.
These payment types have been called “ethically questionable” by finance industry experts, with services such as Afterpay criticised for “normalising debt”, especially as they can be set up with a credit card.
The debate was sparked at the end of last year when Australian Venue Co. signed a deal with AfterPay, introducing the payment option at the company’s 160 bars, pubs and restaurants.
Fiona Guthrie, chief executive of Financial Counselling Australia which coordinates the National Debt Helpline, urged suppliers like breweries to think about the implications of buying alcohol with services like Afterpay.
“I would like industries to join with us and say if we’re going to have this new form of credit – which, for some people, it works – be part of trying to make it safe,” Guthrie told Brews News.
“As part of a broader community, surely this industry and every industry using this would want to be sure when customers use it they are using it safely – and they don’t know that because [these providers] are operating outside of credit rules.”
The use of BNPL to buy a regulated product such as alcohol is a complex issue. Both Retail Drinks and Alcohol Beverages Australia were asked for comment but are still working internally on developing a stance.
There is of course a difference between using BNPL while in a venue versus buying alcohol online, although online retailers too have faced criticism for facilitating quick and easy access to alcohol.
While most breweries and online bottleshops do not offer the payment option yet, there are some that do, including HelloDrinks, which was relaunched during the pandemic in and offers Zip Pay, as well as online wine sites The Wine Collective and VinoMofo.
Update 17/01/22: HelloDrinks has responded saying that it does not currently offer same-day or next-day delivery, but aims to do so in the near future.
“From our experience, we see no difference in a customer purchasing via Credit Card or BNPL, as it stands no checks or questions are asked when a customer is purchasing, at the checkout of their local liquor store. From my experience, I do see some form of control from the BNPL providers,” said founder JP Tucker.
Endeavour Group, owners of the Dan Murphy’s and BWS bottleshops as well as the ALH Group, confirmed that it does not provide directly any BNPL services, although partners, such as Dan Murphy’s on eBay, do provide them.
Endeavour said it was “continuing to monitor customer preferences in this area”.
Afterpay did not respond to requests for comment, but Australian Venue Co. told Brews News that the response to the implementation of Afterpay has been “really positive”.
“The addition of Afterpay to our venues is about offering a service that many of our customers are already using and feel comfortable with,” a spokesperson said.
“As a business, we always aim to be first to market in delivering new and innovative technology for our customers, so we’re really excited to be the first hospitality group nationally to be offering Afterpay as a direct payment option.”
This might not necessarily be an issue of customer preferences however, rather of responsible service of alcohol and issues with BNPL services raised by the credit and finance industries.
Credit cards vs BNPL
Fiona Guthrie of Financial Counselling Australia explained that it is not necessarily the use of credit that is the main issue, as alcohol can obviously be bought with credit cards, but the fact that BNPL providers do not operate within the protective frameworks which oversee the use of credit cards.
“The problem is that it’s a form of credit not regulated by our credit laws, that’s why it’s risky for people and that’s why we’ve been clear, in that we need to have a regulatory framework around buy-now-pay-later.
“At the minute there’s a self regulating code, it’s ineffective, vague, it doesn’t even cover all of the industry.
“It sits outside the payment framework. The Reserve Bank oversees credit cards and eftpos, all the different ways you pay for things, buy-now-pay-later is not within that framework either, that’s why it’s expensive for merchants.”
BNPL operators are reportedly charging a $0.30 fixed transaction fee plus a commission between 3 per cent and 7 per cent on each sale, significantly higher than what the retailer is charged by banks to process other payment types. There are also other small-print considerations to take into account.
Terms and conditions for Zip Pay on the HelloDrinks website, for instance, state that when an interest-free period expires for Zip Money, an annual percentage of 19.9 per cent applies, and there is a monthly account fee of $7.95.
Paying only the minimum monthly repayment amount will not generally repay a purchase within the interest free period, small print on the web page stated.
“The other contrast is that the Reserve Bank says if you buy something on your credit card, there will be a surcharge and the Reserve Bank allows them to pass on the surcharge.
“But with buy-now-pay-later contracts, they say you cannot pass on our costs, you have to absorb them. So it’s an expensive form of payment,” explained Guthrie.
This in itself leads to questions about the use of Afterpay and similar BNPL services in a venue setting, if it is more expensive for the operator to bring in.
“There’s something fundamentally worrying when we know it’s more expensive than other forms of credit but they know they will sell more. That’s ethically questionable.
“The idea of it taking off in pubs where you may not always be making rational decisions and using a product that’s already sitting outside adequate laws, that’s problematic.”