The Reserve Bank has flagged a crackdown on buy now, pay later operators, and may force them to let retailers pass the cost of the short-term credit on to customers, as it outlined plans to launch a review of payment regulations as soon as it is handed stronger powers.

The central bank’s head of payments, Ellis Connolly, said buy now, pay later was “typically an expensive way for merchants to accept payments”. The average fee on purchases made through buy now, pay later is 3.5 per cent of the cost of the goods, compared to 0.4 per cent for debit cards and 0.8 per cent for credit cards.