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Do you run a business using buy now pay later schemes, or are you thinking about developing a buy now pay later scheme for your business? If so, you may wish to consider becoming an Australian Finance Industry Association (AFIA) member. This article will explain:

  • what a buy now pay later scheme is;
  • the benefits for businesses;
  • what AFIA is; and
  • what to know about AFIA’s buy now pay later code of practice. 

What is Buy Now Pay Later? 

Buy now pay later schemes or services allow a consumer to buy goods or services and pay off the price of the goods or services in interest-free instalments.

Quite often, businesses use the services of a buy now pay later provider when selling their products. In these circumstances, the business is effectively an intermediary between the customer and the buy now pay later provider. As a result, the customer is essentially taking a loan from the buy now pay later provider. However, some businesses may wish to offer their own buy now pay later service, meaning they would be the short term lender to the customer. 

Examples of well-known buy now pay later providers include: 

  • Afterpay;
  • Certegy; and 
  • Paypal Pay in 4. 

Countless businesses use these providers when selling their goods and services. 

What Are the Benefits of Using a Buy Now Pay Later Scheme for My Business?

If you are a business, then using buy now pay later schemes can be a good way to help grow your business. In particular, some of the advantages include:

  • increasing sales as customers may feel more comfortable making larger purchases where they know they can spread out the costs of that purchase over a period of time;
  • remaining competitive since many businesses are now offering buy now pay later; and
  • if the business is using a buy now pay later provider, then the business is still paid in full for the product or service at the time of the purchase, meaning that it does not affect its short term cash flow.

Who is AFIA?

AFIA represents its members to drive positive change in the finance industry. Additionally, it acts as a voice for the industry when engaging with the government and regulators in relation to law reform. AFIA can collaborate with the government and other key stakeholders in relation to initiatives and frameworks affecting the finance industry. 

Who Can Be a Member of AFIA?

Only corporations (not individuals) can become members of AFIA. AFIA’s members range from large publicly listed finance companies, to small businesses providing financial services, to professional service providers. Companies or businesses can approach AFIA and request membership. Membership is not compulsory.

AFIA’s Buy Now Pay Later Code of Practice

As well as liaising with the government and regulators, AFIA also works with its members to design and implement codes of practice. These assist in regulating the relationship between AFIA’s members and their customers. The purpose of these codes is to improve customer confidence in the businesses that have adopted the particular code and the goods and services they provide. 

In March 2021, AFIA published a code of practice specifically regarding buy now pay later schemes (BNPL Code). The BNPL Code was developed to assist businesses adopting buy now pay later schemes to proactively increase consumer protections for buy now pay later services or products. 

The BNPL Code applies to ‘code compliant members’, which currently includes the following businesses: 

  • Afterpay; 
  • Brighte;
  • Humm group;
  • Klarna; 
  • Latitude; 
  • Openpay;
  • Pay right; and
  • Zip. 

More businesses may become code compliant members as time goes on. 

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The BNPL Code sets out key commitments that the code compliant members make to their customers concerning buy now pay later schemes. There are nine key commitments that the BNPL Code members make to their customers, which include, amongst others, to: 

  • provide high-quality products and services; 
  • be fair, honest and ethical in all dealings with customers; and
  • undertake ongoing reviews of products and services.

The full BNPL Code is detailed and constitutes a contract, which is legally binding on the code compliant members. 

What Does This Mean for Buy Now Pay Later Providers?

Buy now pay later providers that are not code compliant members are not required to comply with the BNPL Code. However, the benefit of being a member that complies with the BNPL Code is that you may foster more faith in your products by customers. Customers who feel they are afforded extra protections by the BNPL Code may feel more comfortable using a buy now pay later scheme. 

Key Takeaways

If you run, or are looking to start up, a business that is offering buy now pay later services, you could consider becoming an AFIA member and being listed as a BNPL Code compliant member. Alternatively, if you are a business that wants to use an already established buy now pay later scheme (for example, Afterpay), you might want to consider using a buy now pay later provider that is a BNPL Code compliant member. 

If you are a business and need assistance in relation to disputes with customers, what the obligations under the BNPL Code require, and other legal obligations you may have when providing buy now pay later services, LegalVision’s dispute and regulatory lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What is Buy Now Pay Later? 

It is a scheme or service that allows a consumer to buy goods or services and pay off the price of the goods or services in interest-free instalments.

Who is AFIA?

The Australian Finance Industry Association (AFIA) is an association that represents its members in the finance industry and acts as a voice when engaging with the government and regulators. AFIA has a buy now pay later code of practice that applies to code compliant members.


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