Major Afterpay changes, including delayed initial payments and preferred payment day, come into effect

Major changes to Buy Now Pay Later (BNPL) service Afterpay have come into effect.

Under its new terms of service, select customers will now have the option to delay their first payment.

And all customers will now be able to choose a day of the week to pay their instalment, rather than having the day of purchase automatically become the day of all future payments.

An expert has labelled the changes “sensible”.

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

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

“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’ve failed to make a payment on time or where we otherwise reasonably need to do so.”

Customers will likely need to undergo a credit check before qualifying for delayed initial payments, University of Sydney Business School Associate Professor Andrew Grant said.

“In the case of ‘low risk’ consumers — either identified through their credit history, or a sequence of good payment history with Afterpay — providing them an option to shift the first payment by up to two weeks would be similar to other forms of credit,” Grant said.

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

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

“But this could well be offset by an increasing customer base and by careful credit assessment.”

New ‘sensible’ change

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

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

If customers do not select a preferred payment day, a default one will be chosen for them, but customers can change this.

Grant believes this change is a “sensible option ... providing that consumers select the option to make their payment day on or soon after their payday”.

“A large reason for missed payments — which incur dishonour fees as well as late fees — is due to mismatched pay cycles,” he said.

This can leave people low on funds before payday, but when a payment is due.

Preferred payment days “will help to reduce the risk that Afterpay tries to collect payment via direct debit when the consumer is ‘just before’ their payday”, Grant said.

“Smoothing of expenditure patterns is one of the valuable features of BNPL, and this should help for budgeting with customers.”

You can find Afterpay full terms on its website.