Even a bank credit card at around 20% (based on the full monthly repayments) would have been manageable.

Now let’s look at the BNPL After-Pay virus (and we are not just picking on it)

Afterpay is a pioneer in this ‘fin-tech’ arena. Some very prominent names and retailers are behind it to help boost sales in tight times. In fact, it says it offers much more than a payments service – it is a ‘platform’ that provides inbound business to retailers and generates incremental sales.

After-Pay virus
Yes it really used this advertising encouraging wanton and irresponsible spending

Fin-tech often operates in unregulated segments of the market, so at the moment, it is doing nothing wrong. Ethically you could easily argue otherwise.

Afterpay has succeeded because it can do what the regulated banks and credit card companies cannot. Just remember that Afterpay’s founder was a 29-year-old university student who has since largely cashed out. Afterpay has not made a profit to date – the number of users and money it lends drives its share value.

After-Pay virus

Afterpay is like a lay-by system except you get the goods upfront and the merchant paid upfront (less a hefty merchant fee). If you make the four equal payments every fortnight, then it costs no interest.

It takes the risk that you will pay and makes huge rewards if you even miss a payment by one day.

Afterpay claims, “Around 95 per cent of payments never occur a late fee.” Yet some 24.4% of its income is from late fees, and 75.6% comes from merchant kickbacks (Source).

Afterpay is not transparent about merchant kickbacks that are ‘commercial in confidence’ but we understand range from 4-10%! That is money that you could have negotiated off the full retail price. And it is why Afterpay is not always available on sale items. Credit card merchant fees, by comparison, are around 1%!

The RBA has announced it will be conducting a root and branch review of card payments regulation in 2020, with BNPL services part of that review.

Afterpay privacy – nope!

Its privacy terms are scary. We think they are way over the top and should be restricted to the absolute minimum necessary to process a transaction between you and the retailer.

  • Contact information, such as your name, address, phone number, email and other similar information.
  • Financial information, such as the full bank account numbers and/or credit or debit card numbers that you link to your Afterpay account or give us when you use Afterpay Services.
  • Detailed Personal Information such as your date of birth, driver’s license number, or other identification information or documents.
  • We may also obtain information about you from third parties including our Partners and related companies, as well as credit reporting bodies and identity verification services, and publicly or commercially available sources to comply with relevant legislation (e.g. anti-money laundering laws).
  • Access to certain Personal Information stored by third parties such as social media sites (e.g. Facebook and Twitter). The information we may receive varies by site
  • Personal Information if you enter a competition or promotion we run (either directly or through our marketing agents or our Partners)
  • We may evaluate your computer, mobile phone or other access device to identify any malicious software or activity. This is a euphemism for its app, cookies, tracking tools and spying.
  • We may also collect additional information from or about you in other ways, such as through contact with our customer support team, suppliers or service providers (whether via mail, email or through telephone enquiries), your responses to a market survey, and from interactions with Afterpay’s Partners or as otherwise notified to you at the time.
  • And what you shop for and buy

Afterpay has the right to do almost anything it wants to (by omission) with your data

For example, it sells such data to online advertising vendors to provide you with ‘relevant and useful’ ads. This may include ads served on or through its Websites or on other companies’ websites. 

In other words, it does not do anything that different from the masses of data harvesting loyalty programs – it is just not as upfront about it.

Afterpay states, ‘Pay nothing extra when you pay on time’. Buried in the Terms section is

  • If payment is not processed on or before the due date, late fees* will apply – initial $10 late fee, and a further $7 if the payment remains unpaid seven days after the due date.
  • Late fees* For each order below $40, a maximum of one $10 late fee per order. For each order of $40 or above, the total of the late fees are capped at 25% of the original order value or $68, whichever is less. See Schedule 1.
  • A pre-authorisation on your nominated card, up to an amount of your first instalment. If you cannot afford the first payment, then it becomes the credit card companies issue.

Afterpay is a drug and while it is not quite as insidious as Payday lending its hard to get off.

GadgetGuy’s take – Thanks, Scott for alerting us to the After-Pay virus.

As Scott suggests, we are going to send this to Michael Sukkar MP, Assistant Treasurer (Michael.Sukkar.MP@aph.gov.au) responsible for investigating payday lending.

Michael, payday lending and BNPL are creeping cancers and an addictive drug that, like the scourge meth, must be eliminated. A more responsible system of lending via the banks (no not junk lending but for essentials to the people that will pay it back) is the answer.

This is not responsible advertising

As Scott Pape says, “Do your job and put a muzzle on these mongrels now!”