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More Australians are embracing buy-now pay-later (BNPL) than ever before as giants like Afterpay (ASX: APT) and Zip (ASX: Z1P) continue to consolidate the market.
New players in the sector are disrupting traditional financing methods with a BNPL model too, as seen with the recent launch of ListReady, a BNPL option for the real estate marketing sector.
BNPL has become so popular that Australians are in fact ditching their credit cards in favour of services like Afterpay, Zip, Sweden's Klarna, Israel's Splitit (ASX: SPT) and New Zealand's LayBuy.
According to research from comparison site Mozo.com.au nearly half of all BNPL users have either cancelled or stopped using their credit cards.
Nearly 30 per cent of Australians have a BNPL account according to Mozo's research, equating to 5.8 million users nationally.
Mozo director Kirsty Lamont says the trend indicates that BNPL models have well and truly disrupted how Australian's pay for goods and services.
"Buy Now Pay Later has changed the face of the way we pay for goods with more than 25% of users cancelling their credit card and a further 23% saying they no longer use it," says Lamont.
"The ease and convenience of opting for bite size scheduled payments has certainly taken Australia by storm, but the pitfall is that it's incredibly easy to bite off more than you can chew and miss a payment."
Lamont says many Australians are unaware of the risks associated with not meeting payments on time, with one in three BNPL users missing one or more payments.
The 'worst offenders' are males aged 18-24 years with nearly half of the demographic missing one or more payment, while 40 per cent of females aged 25-34 admitted to having missed one or more payment.
Afterpay continues to dominate the market share, with 84 per cent of users holding an Afterpay account that can be used at approximately 13,000 retailers across the country.
The transition to BNPL away from credit cards is encouraging Australians to spend more, but in many cases users are buying things they wouldn't otherwise purchase.
"Our research found that one in four users are hiding their Buy Now Pay Later purchases from loved ones, indicating that a number of users aren't proud of their spending habits, says Lamont.
Males aged 25-34 were most likely to conceal their purchases with nearly 35% admitting they did so.
The ease of the services is also determining which stores users will purchase from; rates of purchases through a BNPL app up from 14 per cent to 27 per cent of all purchases.
"Buy Now Pay Later users appear to be making a high number of purchases through the payment platform, rather than making the odd purchase here or there," says Lamont.
"25% of users have 3-5 payments on the go at any time, which can be a lot to keep track of."
While the elements of convenience and immediacy are the attractive selling points of BNPL, Lamont says it still pays to keep a solid grasp on personal finances to ensure payments can be met.
"To stay on top of payments it's important you have a solid idea of your incomings and outgoing in your account and understand when your scheduled payments are," says Lamont.
"You will be paying for an item months after you've walked out of the store or click 'buy now', so it's crucial to consider the possibility of poor credit ratings and additional costs through late payment fees if you don't think you can meet your payments on time."
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