Buy-now-pay-later schemes have proven popular in New Zealand with 220,000 Kiwis signed up to just one of the four companies operating locally.
Laybuy, like other providers, offer deferred payment that allow consumers to pay for purchases over six weeks. They do not charge interest, but do charge default fees if a buyer fails to make payments on time.
Laybuy launched in May last year and has 2500 merchants signed on to its service.
Founder Gary Rohloff said between 60 and 100 new merchants sign on each week from clothing and footwear retailers through to travel agents and ticket sellers.
Some hairdressers and health spas also accepted it as payment option.
"It's still clothing and apparel that is very popular, and travel is particularly popular," Rohloff said.
"It has become a very popular way for people to purchase."
Apparel and clothing purchases make up 60 to 70 per cent of all Laybuy sales with an average transaction spend of $130.
Laybuy offers payment of goods and services over six weeks. If weekly payments are missed there is a default charge of $10.
"We have two groups of consumers using Laybuy," said Rohloff. "We have the millennial group which is a bubble in our database from about 22 to 32 years of age and then we have another bubble that is aged over 45 years."
Retailers using the payment service include Glassons, Hallenstein Brothers, North Beach, Storm, Stirling Sports, Barkers and Ruby, among others.
Rohloff said there was huge potential for the buy-now-pay-later market.
"It also gives young people, particularly those who are looking to get themselves on the credit scoring radar who don't like credit cards... it gives them a chance to establish a credit score."
There are four buy-now-pay-later companies operating in New Zealand; Afterpay, PartPay and Oxipay, with Laybuy the dominant player.
Consumer NZ head of research Jessica Wilson said buy-now-pay-later schemes were a concern.
"Our main concern has been the risk to consumers getting into debt and then potentially having extra default fees adding on to the amount they need to pay back, and also, how that might affect their credit score," Wilson said.
"It may look attractive if you've not got money up front to pay but really they do come with a risk, you could end up owing more than the cost of the product."
Buy-now-pay-later companies were heavily promoted by retailers, Wilson said.
Wilson believed there was a risk consumers would confuse the system with traditional lay-by, which is covered by the Fair Trading Act.
"A traditional form on lay-by is where you don't pick up the item until you have actually paid it off. In that situation retailers can't charge default fees and you've also got additional rights to cancel the sale if you change your mind."
Consumer credit law is under review with buy-now-pay-later schemes mentioned in discussion documents, addressing whether they are adequately regulated.
MBIE has received 86 written submissions on the review, which will be made public later this month.
Commerce and consumer affairs Minister Kris Faafoi told the Herald he was working on policy decisions to be addressed as a result of the review.
"We aim to confirm our decisions and announce them as a package of reforms to the Credit Contracts and Consumer Finance Act later in the year," Faafoi said.
"These schemes in a way have fallen a little bit through the gaps of regulation as they are relatively new," Wilson said.
"We would like to see that there are clear rules around how they operate."