A daily credit reporting system will tell buy now pay later (BNPL) providers if a new customer is behind on repayments with other providers, in an effort to protect people in financial difficulty.
Credit bureau Centrix is working with major buy now pay later providers, such as Afterpay, Zip and Laybuy, to launch the new initiative, PayWatch.
The providers collectively represent more than 90 percent of BNPL customers.
Recent Centrix figures showed a record 10.5 percent of BNPL accounts were in arrears in March as an increasing number of people used the schemes for meat, nappies and other everyday essentials.
The schemes allow customers to pay for purchases over several interest free instalments, but those who fail to make repayments faced late fees.
The new initiative, PayWatch, will give BNPL providers information about a consumer's credit risk, including if a potential new customer was behind on existing payments with another BNPL provider.
Centrix chief operating officer Monika Lacey said the data sharing between providers would reduce the number of people getting further into debt, should they be behind in payments to multiple providers.
"Unlike the existing Comprehensive Credit Reporting, which supports traditional credit products and their monthly payment cycles, this dynamic and near real-time system captures BNPL repayment performance on a daily basis, giving BNPL providers an accurate view of someone's indebtedness status more frequently," Lacey said.
She said the daily updates from providers would help to better manage any potential issues and would flag any customer who was behind on their payments.
Ministry of Business, Innovation and Employment officials were considering draft government regulations that would force lenders to do robust affordability checks for loans of more than $600 dollars as part of regulations for the sector.
However, some financial advisers have argued that threshold was far too high for people on low incomes.