Afterpay introduces major changes to service with delayed initial payments and preferred payment day

Buy Now Pay Later (BNPL) service Afterpay has announced changes to its Terms and Conditions.

Under the new terms, select customers will now have the option to defer their first payment.

All customers will now be able to choose a day of the week to pay their installment, instead of the day of purchase automatically being the day of all future payments.

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An expert described the changes as “sensible”.

The most significant change announced is the ability for select customers to delay their first payment by up to two weeks for eligible orders.

“The good news is that more customers will get access to this benefit,” Afterpay said in an email to customers.

“We can decide whether to grant you access.

“When deciding this, we take into account a range of factors, including how long you’ve been with Afterpay and your payment history.

“We may remove access if you have failed to make a payment on time or when we otherwise reasonably should.”

Customers will likely have to undergo a credit check before they are eligible for delayed down payments, said Andrew Grant, an associate professor at the University of Sydney’s business school.

“In the case of ‘low risk’ consumers – either identified by their credit history or a string of good payment history with Afterpay – giving them the option to delay the first payment by up to two weeks would be similar to other forms of lending” , Grant said.

“This is in contrast to, say, making the first 25 percent of the payment at the time of purchase or order.

“So, potentially, there could be a higher risk of ‘larger’ bad debts,” he said, such as “non-paying customers who default on 100 percent of their purchase instead of 75 percent of their purchase.

“But this can be offset by a growing customer base and a careful credit score.”

A new “sensible” change

Customers can now schedule their payments for a day of the week that suits them.

In its announcement, Afterpay said it would help customers “manage (their) finances more effectively.”

If customers do not select a preferred payment day, a default day will be selected, but customers can change this.

Grant believes this change is a “sensible option,” “provided consumers choose the option to make payday on or soon after payday.”

“A big cause of missed payments — which lead to dishonor charges as well as late fees — is due to inconsistent pay cycles,” he said.

This can leave people short of funds before payment day, but when payment is due.

Preferred payment days “will help reduce the risk of Afterpay attempting to collect a payment by direct debit when the user is ‘just before’ their payment day,” Grant said.

“Smoothing cost patterns is one of BNPL’s valuable features and this should help budgeting with clients.”

You can find Afterpay’s full terms and conditions on its website.