Offering a BNPL option for childcare risks increasing debts for struggling parents

More than 10,500 childcare centres across Australia and New Zealand will soon offer a ‘buy now pay later’ option to parents for paying their fees, thanks to Zip partnering with Xplore Technologies.

The move is designed to offer more flexibility to parents, with both the CEOs of Zip and Xplore saying they want to make childcare more affordable for families by presenting an additional option for relieving the financial burden of paying fees upfront. They say that some parents are already using credit cards, and BNPL provides an alternative.

This may help some families. But it may also widen debt and financial hardship for many others, later on.

And the fact that the demand exists for this kind of service, highlights just how broken the childcare system really is.

While there have been some improvements to the subsidies parents can access, offsetting the cost of childcare, these improvements have been slow to keep up with an increase in daily charges.

Recent research by KindiCare found that parents are paying up to $168 per day in parts of Sydney, and up to $161 a day in areas of Melbourne.

These fees can often see families making difficult choices regarding whether or not to work an additional day or shift — decisions that are often left to mothers, and can see mothers pulling out of the workforce or otherwise stepping back from full time work for a period — which hinders their career opportunities and retirement savings later on.

But for single parents, these fees can also become so impossible that they face further limitations regarding when and where they can work, and how much work they can take on.

The risk of BNPL for childcare

The BNPL option may provide some kind of flexibility for those making these difficult decisions, but it also carries plenty of risk.

Once primarily used for clothing purchases, the BNPL option is creeping into other areas of life: including here, with childcare. Those needing the help to pay private school fees may also soon have an option, with the NAB backed fintech startup Edstart pursuing funding to launch such an option. Meanwhile, Afterpay has just this week expanded to include hospitality venues like pubs and restaurants, which has seen consumer advocates issuing warnings to people, noting it may exacerbate existing financial hardship, particularly over the Christmas period.

Perhaps “paying later” on childcare fees is a better debt to incur than that which would come from hospitality venues. But given the rising daily childcare fees, it’s also a debt that could accumulate into something that becomes extremely difficult to pay off.

And what if a parent or carer loses their job, but still has debts and fees to pay off?

Is this really the answer to the declining women’s workforce participation rate, and for addressing how women’s careers and economic security have been disproportionately impacted by the pandemic?

Thankfully, this week we’ve seen some recognition of the economic burden childcare fees are placing on women. The NSW government has highlighted how women are critical to the state’s economic recovery, with Matt Kean suggesting a big spend on childcare might be on the agenda.

“We need to get the cost of childcare down so that women do not get penalised for returning to work,” he told The Sydney Morning Herald.

Meanwhile nationally, the opposition has promised to lift the childcare subsidy for every family, no matter what their income bracket.

It shouldn’t have taken a pandemic to get here.

And it shouldn’t require BNPL operators to come in and solve the challenge of how parents can pay childcare fees.

This article was first published by Women’s Agenda.