$2 PARTY, page-1348

Currently, merchants are charged a merchant service fee of between two to eight per cent of the total of each transaction by buy now pay later providers, with the amount varying between different providers.

But what they all have in common is a clause in their merchant agreements that prohibits the merchant from passing this cost onto the consumer, which currently gives buy now pay later providers an advantage over credit card issuers.

Currently, if a merchant is charged a four per cent fee on a $100 purchase, the cost of the $4 fee is borne by the merchant, who only receives $96 for the sale.

Regulation allowing this cost to be passed on would mean that a consumer using buy now pay later would pay $104 for a $100 item, which will make using buy now pay later more expensive than paying by EFTPOS or using cash.