“The amount of retailers offering Afterpay seems to have exploded in recent times, so I think there is a recognition by retailers that if you don’t offer Afterpay, then you’re potentially cutting yourselves out of a certain cohort of society who for whatever reason have moved away from credit cards,” he said.
Debit card more popular
However, with soft wage growth and declining “wealth effect” associated with the loss of equity in the property prices, he expected total credit card balances to remain high as consumers struggle to pay down their debt, he said.
RateCity research director Sally Tindall agreed one of the major contributors to this trend was the popularity of Afterpay, Zip Pay and other buy now, pay later providers as an alternative to credit cards.
“Anecdotally, young Australians are happy to use Afterpay rather than a credit card,” she said.
According to regulatory data, in the last financial year two million consumers have used a buy, now pay later service at least once, compared with 400,000 customers two years ago.
She said consumers traditionally took out credit cards to pay for things, but most debit cards now have Visa or Mastercard attached which can be used to make payments online and over the phone.
In addition, fintech services like PayPal and Osko are making bank transfers faster and more secure, she said.
“Anecdotally, a lot of young people choose to just rely on their debit card because they are worried about the trouble a credit card can bring,” she said.
She said some people may also be choosing to cancel their credit cards altogether because they are looking to enter into the property market at a time when banks are enforcing stricter responsible lending requirements.
“Because the screws have been tightened on home loan serviceability requirements, some people choose to reduce their credit card limits or cancel their credit cards completely,” she said.