Lay-by makes a comeback with online ‘buy now, pay later’ schemes

If you miss the good old days of lay-by as a way of managing the family budget, the new cohort of ‘buy now, pay later’ schemes could be just what you’re looking for during the lead up to Christmas.

Online services such as AfterPay, OpenPay and zipMoney extend a line of credit to shoppers at participating retailers, that can be repaid over a defined period of time.

It’s like the traditional lay-by system, but is set up online at the time of purchase with automatic payments linked to a credit or debit card. Unlike traditional lay-by, you take the goods with you at the time of purchase, but are charged a one-off fee by the payment provider for what’s effectively a cash advance.

According to a News.com.au article, AfterPay now has more than 1.1 million customers shopping at more than 8,600 retailers. Interestingly, about 85 per cent of their transactions are linked to a debit card rather than a credit card.

While AfterPay requires customers to split payments over four equal payments every fortnight, Openpay offers shoppers interest-free periods of up to 36 months depending on the amount to be paid off.

Openpay is used by more than 200,000 shoppers throughout Australia and New Zealand, across 4,000 retailers, according to News.com.au.

Comparison site Finder.com.au helps consumers compare the offers from the various payment schemes, with reviews of all the main providers. 

With Baby Boomers expected to embrace online banking more than ever, these “buy now, pay later” schemes could prove extremely useful as a way of spreading the costs of larger ticket items over time.

New research by Commonwealth Bank found that Baby Boomers are set to experience double digit growth (10 per cent) in terms of their online spending, eclipsed only by Pre-Boomers (those over 70 years old), where spending is expected to grow by 18 per cent over the next 12 months.

“The older generations will be a strong driver of online sales growth in the coming year, with purchases from Pre-boomers expected to grow at twice the rate of the average Australian shopper, albeit from a low base,” said Jerry Macey, national manager of retail at Commonwealth Bank.

Despite the fact that shoppers still want to touch and feel items before they buy, look for better prices online or just aren’t ready to purchase on the spot, “shrewd multichannel retailers are capitalising on this trend by ensuring a seamless experience for customers shopping both in-store and online,” Macey said. 

As with the traditional lay-by system, users of these newer online payment schemes can be stung with financial penalties if the items are not paid in full by the end of the agreed term. It’s always wise to check the terms and conditions of any new service before providing your credit card details.

Do you miss traditional layby services? Would you consider using online schemes like AfterPay?