Kiwis spent about $1.7 billion last year through buy now, pay later services but there are concerns the payment services could be fuelling addiction by allowing alcohol purchases.
Concerns are also rising that people on the poverty line are using the services to pay for everyday essentials such as food due to the spiralling cost of living.
Buy now, pay later (BNPL) services allow users to make purchases on credit and usually, 25 per cent of the total price is paid upfront and the rest in three timed instalments. They do not charge interest but users may face late fees if they do not keep up with payments.
Afterpay - one of New Zealand's biggest BNPL players - told NZME consumers were increasingly using its service for discretionary spending and people had been using credit cards to pay for alcohol for decades. It said Afterpay was designed to help consumers take control of their budgets and manage their spending responsibly.
The Ministry for Business, Innovation and Employment said data on BNPL growth suggested it was rapidly becoming an established form of credit in New Zealand.
The number of active consumers had doubled in the past two years, with an increase of 20 per cent in 2021.
Datamine records from 2019 to 2020 showed BNPL online transactions increased by 57 per cent.
A ministry spokesperson said it was reviewing 63 submissions about the services and the majority wanted alcohol purchases banned. Concerns were also raised about credit being extended to those who cannot afford it.
It would report to Minister of Commerce and Consumer Affairs David Clark, who was expected to bring a proposal to the Cabinet soon to decide the Government's approach.
Bay Financial Mentors manager Shirley McCombe said the use of the services to purchase alcohol concerned her, especially for those who lived with addiction.
She said the sector had "huge concerns" about clients accumulating debts on buy now, pay later services.
They were being used for dental work, car repairs and tyres, food, clothing, shoes, haircuts, feminine hygiene products, alcohol, and even vouchers.
"If managed well, it can be a good solution, but so often it is not."
Last month its clients had $55,647 booked up on BNPL services compared to $48,792 in July last year to bridge the gap between their income and the cost of living.
Rotorua Budget Advisory Service manager Pakanui Tuhura said the services became an issue when people did not pay on time as the penalty charges were "substantial".
He said juggling multiple debts could be "confusing and expensive if you don't repay them in the correct sequence".
Te Rūnanga o Ngāi te Rangi Iwi had made a submission and raised concerns with the ministry about BNPL. It wanted alcohol excluded.
Ngāi Te Rangi chief executive Paora Stanley said having greater access to alcohol - which some services allowed - created more problems for people battling addictions.
Stanley said people were also using the services because they did not have enough money for day-to-day expenses.
"They start racking things up and what you have got to deal with is why they can't live on what they have."
Retirement Commissioner Jane Wrightson said there had been a rise in bad debt and some of that could be attributed to BNPL services.
She understood more people were using these to cope with the rising cost of living.
"Unmanageable debt is a terrible trap. Debt can quickly add up if you have too many transactions, miss repayments, and get hit with late fees."
She said the consumer protection rules around these services need to be clear and it was good the Government was looking into this.
Te Tuinga Whanau Support Services chief executive Tommy Wilson said alcohol was the biggest problem for clients.
"It is the most dangerous drug we face. People are hurting and the use of any drug is how you take away the hurt temporarily."
He supported any moves to de-glorify alcohol.
Alcohol Healthwatch executive director Dr Nicki Jackson said alcohol was New Zealand's most harmful drug, so effective safeguards needed to be in place.
BNPL schemes took alcohol accessibility to a new level, especially online, she said.
"Low upfront prices for alcohol are attractive for many groups sensitive to the price of alcohol, including low-income drinkers and young people. These are also groups that experience significant harm from their drinking.
"We want to see Buy Now, Pay Later services regulated and we want alcohol to be excluded."
It had also made a submission to the ministry.
Auckland's Ebrewstore owner Peter Morgan offered Afterpay and Zip but favoured banning alcohol sales.
He said his customers could afford to pay but people who went to bottle shops, and effectively booked alcohol up, could get into trouble.
"Once they drink it you can't get it back off them so they are going to go straight to debt collection."
An online wine merchant who asked not to be named said it stopped offering Afterpay weeks ago due to "very little uptake".
The company was concerned about the cost of fees and was aware of public concern.
Afterpay came to New Zealand in 2017 and had more than 20 million customers and more than 144,000 active merchants globally.
A spokeswoman said payment preferences were changing and consumers are increasingly using BNPL for discretionary spending.
She said Afterpay was designed to help consumers manage their spending responsibly and was an inherently safer service than credit cards.
"They [credit cards] charge interest rates of 20 per cent or more, trapping people into a revolving cycle of debt. These products have been used for decades to purchase alcohol."
Alcohol sales were strictly regulated to ensure venues and retailers provided products in a safe and responsible manner.
Afterpay kept spending limits very low – its average order value was about $150.
About 98 per cent of payments never incurred a late fee and those that did were capped did not accumulate or compound over time, she said.
NZME asked people for their thoughts on Buy Now, Pay Later services, if they had used them and if alcohol sales should be banned.
Kate Knox, 40, Taupō
''I've used the schemes before irregularly and my purchases have included a gazebo, shoes, clothes and for electrical repairs. I'd never use it if they charged interest. Buying alcohol is down to personal choice but I don't think that it's responsible."
Sally James, 50s, Tauranga
"I wouldn't do it because spending money that you haven't got is dangerous. I don't even do laybuy or hire purchase. It seems they are allowing people to live beyond their means. I totally think alcohol should be banned as it's certainly not an essential.''
Stephen Haddock, 44, Utuhina
"I've used the schemes a couple of times before to take advantage of deals. It's a short-term fix ... done and dusted in a few weeks. I don't think there should be a ban on alcohol purchases as people can still purchase other large purchases like expensive electronics. But you should be suitable for borrowing the money."
Wayne Saunders, 60, Te Kaha
"If you haven't got the money don't buy it. It's a debt trap and [in my view] targeting the wrong people. I've never used it. You shouldn't be able to buy alcohol as that is an easy way to fuel people's drinking."
"Before, you had no limitations ... and all of a sudden there’s a handbrake on."