This spend was equivalent to about 15 per cent of year-on-year non-food sales growth last year, UBS said.
“We believe these models may have fuelled sales that otherwise may not have occurred in a part of the market that previously did not have access to credit,” Mr Gilbert said, noting that about two thirds of Millennials do not have a credit card.
Afterpay and Zip have achieved high customer penetration in a relatively short period of time, with more than 10 per cent of Australians estimated to be using their services.
Growing concern
Afterpay now has about 2.5 million customers and about 15,000 retailers on its books in Australia and New Zealand, while Zip has about 1.5 million local customers and more than 10,000 retailers.
Based on recent trading updates, Afterpay and Zip are on track to generate about $4 billion of gross transaction value in fiscal 2019.
Consumer advocates and regulators are becoming increasingly concerned about the growing popularity of new short-term credit services amid soaring consumer debt.
Sources claimed last week that even payday lenders had started knocking back loan applications from long-term customers “up to their necks” in short-term debt.
However, “buy now, pay later” players dodged a bullet this month when a report from the Australian Securities and Investments Commission said the National Credit Code would not be extended to the sector.
Afterpay says it promotes responsible spending and offers customers a fundamentally different proposition to traditional credit products.
Customers pay for goods in four instalments and are not charged interest, but the company charges retailers a transaction fee (equivalent to about 4 per cent to 6 per cent of transactions) and customers who are behind on their payments also pay steep late fees.
UBS said “buy now, pay later” schemes were margin dilutive for retailers but helped boost comparable store sales.
The UBS report is likely to add to investor concern about the outlook for listed retailers in 2019 as house prices fall and consumers are no longer prepared to dip into their savings to fund discretionary spending.
The consumer discretionary index has fallen 14 per cent this quarter, dragged down by the likes of Lovisa, Premier Investments, JB Hi-Fi, Super Retail Group, Harvey Norman and Kogan.com.
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