According to one of Australia’s leading providers of finance for rooftop solar installations, the solar industry has been an early pioneer in the surging ‘buy now pay later’ market, with short-term credit being used to finance around one-in-ten rooftop solar installations, and brushed off suggestions they had been used inappropriately in high-pressure sales.
Founder and CEO of rooftop solar financier Brighte, Katherine McConnell, told the Smart Energy Council’s virtual conference on Wednesday, that Australia has been a leader in the development of ‘buy now pay later’ products, that while these products are new in other retail sectors, they have been used in the solar sector for more than a decade.
“Not many people know, but ‘buy now pay later’ was founded in Australia. It is this huge global phenomenon, but it was founded in Australia. This amazing financial innovation that’s taking over the world. The other thing that’s really interesting is ‘buy now pay later’ has been used in the solar industry for about ten years,” McConnell said.
“Ten years ago, we saw PPA’s and we saw other credit products being used by Solar City and Sunrise in the US,” McConnell added. “Australians have a preference for owning products and a preference for transparency and so it has been used by the Australian industry for quite a long time.”
“A stat that we have seen is that ‘buy now pay later’ has been used to pay for more than 10 per cent of all solar installations in Australia to date. So that’s quite phenomenal that more than 10 per cent of Australian solar installations have been funded with a buy now pay later contract.”
Brighte says that it has provided finance for more than 52,000 rooftop solar installations in Australia. When done appropriately, providing finance for a rooftop solar system can help breakdown the barrier that higher upfront costs can create, while allowing finance for a rooftop solar system to be paid off using the savings generated by the solar installation.
Similar models have been used by other providers, including FlexiGroup, RateSetter, as well as government backed initiatives been offered to some households by the New South Wales, Victorian, South Australian and Queensland governments.
Australian-based ‘buy now pay later’ providers have surged into the retail market, with ASX-listed providers like AfterPay and Zip Pay seeing a huge surge in uptake as shoppers take advantage of easy access credit.
While they have surged in popularity, some consumer groups have urged caution in their use, as they are still a way for shoppers to accrue more debt, and their overuse could lead to mounting debt problems.
The solar industry has not been immune to this, with the ABC’s 730 Report highlighting a number of complaints from rooftop solar customers about the use of ‘buy now pay later’ products as part of high-pressure sales tactics to convince households to sign up for an installation.
In response to a number of complaints, a New Energy Tech Consumer Code developed by the ACCC, solar installers will be limited to when they can offer ‘buy now pay later’ products, forbidding their use in unsolicited sales of rooftop solar installations.
“Households can pay significant amounts for products like solar panels and battery storage, and sometimes they end up with expensive products that don’t suit their needs or they can’t afford,” ACCC Commissioner Stephen Ridgeway said in December last year, when launching the New Energy Tech Consumer Code.
“This Code aims to give consumers more information to help them make informed purchases, and more protections against being sold unsuitable or unaffordable products.”
The ACCC had considered banning the use of ‘buy now pay later’ products altogether for rooftop solar installations, but eventually opted to allow customers who have solicited a rooftop solar installation the option of using such a finance product.
“On this issue, the ACCC has sought to strike a balance between providing appropriate protections for consumers, while not unduly restricting consumers’ choices in how they can finance purchases.”
According to McConnell, the solar industry has avoided some of the teething issues that have plagued more recent providers of ‘buy now pay later’ services, which have attracted the attention of market regulators.
“Both ASIC and the ACCC have been looking a little bit closer at buy now pay later for a few years, just because it’s had 5.8 million Australians using it and it’s a new product. They’re just looking at the regulatory landscape and whether any changes need to be made to accommodate this much loved and newer product.”
“One of the areas they’ve been looking at relates to merchant fees, and they’re trying to understand how the fees are charged, any impacts it has on customer market pricing, and they’ve actually given this activity a name. It’s now being referred to as surcharging. Neither ASIC nor the ACCC have found that buy now pay later providers, specifically in the energy industry, are engaging in misleading conduct such as surcharging.”
“They’ve acknowledged that if a customer or consumer did choose a higher priced product as a preferred product then they did that because they had full choice and then they had transparency and options around other prices and other products that they could use,” McConnell added.