Reserve bank launches probe into Afterpay fees

High fees charged to retailers by buy now, pay later providers will be investigated by the RBA, with the central bank to determine whether stores should be able to pass them on to customers.

The Reserve Bank will investigate whether retailers should be able to charge a customer for using buy now, pay later services such as Afterpay.

The probe comes amid concerns retailers are being unfairly prevented from billing a customer for using such as service, the provider of which takes a cut of the sale price.

The RBA’s Payment System Board says moves by buy now, pay later providers to stop retailers applying a surcharge on customers using their service could be “problematic” for retailers who felt compelled to offer the payment method.

The board noted fees charged by buy now, pay later schemes are much higher than those charged by other payment methods such as debit and credit cards.

The schemes allow shoppers to buy and receive goods and pay companies such as Afterpay in equal instalments over one to two months.

The Reserve Bank will investigate whether retailers should be able to charge a customer for using buy now, pay later services such as Afterpay. Picture: AAP

Afterpay and other providers pay retailers for the goods but keep 3 per cent to 7 per cent of the purchase price as a fee.

Retailers are generally prevented from charging customers who use these services for that fee, meaning the cost must be spread over the price of all other goods or the business must absorb it.

“BNPL (buy now, pay later) services are relatively expensive for merchants to accept and they usually restrict the ability of merchants to apply a surcharge to pass on these costs to the customers that directly benefit from the service,” the Payment System Board said in its annual report released Thursday evening.

“This can be problematic for merchants that feel compelled to offer BNPL services as a payment option for competitive reasons, but are unable to recoup the merchant fees from the customers that directly benefit from the service.

“Accordingly, an issue for the bank is whether policy action in relation to these no-surcharge rules should be considered.”

MORE NEWS:

Barefoot: Big lesson grandparents can teach kids

CBA’s exclusive deal with Afterpay rival

Afterpay’s half a billion dollar hit

CBA customers’ rage as payments missing

The board said the popularity of buy now, pay latter services appeared to relate to their convenience and potentially providing a lower-cost alternative to consumer credit.

“For merchants, BNPL services may be attractive because they may facilitate increased sales,” it said.

“In addition, as merchants are paid upfront by the BNPL provider, they do not bear the risk of fraud or customer non-payment.”