BNPL has exploded in popularity as millennials shun credit cards in favour of the products.  Globally, the BNPL industry is estimated to be worth around $US157 billion, according to the Global Payments Report, and in Australia, the BNPL market was worth around $14.2 billion in the financial year ending 2021, according to UBS.

BNPL products allow customers to receive goods and services up front, while paying for them over time. The BNPL companies usually cover the cost of the purchase and require the customer to repay the amount in instalments.

A global alliance of consumer groups is calling for regulation of the buy-now, pay-later (BNPL) industry amid warnings more of its customers will end up in a debt spiral as the cost of living goes up.

Consumers International, an organisation that represents consumer groups in 10 countries including Australia, New Zealand, the US, Korea and Denmark, is calling for urgent action.

Choice, Financial Counselling Australia and Consumers’ Federation Australia are among alliance members that have released a global statement’ with six key requirements for effective regulation of BNPL.

They ask regulators to:

  1. Regulate BNPL products in the same way as other forms of credit
  2. Require merchants to provide an option that allows a consumer to pay for a product in full at the time of purchase
  3. Obligate BNPL providers to assess whether it is suitable and affordable to provide credit to people, without risk of causing financial harm
  4. Prohibit BNPL providers from marketing their products in ways that target children or people in financial hardship
  5. Enable consumers to have access to redress through fair and independent mechanisms when something goes wrong
  6. Ensure regulators monitor and report publicly on the impact of BNPL products for different groups of consumers

“This is united call for governments and regulators to just regulate buy now pay later, like every other form of loan,” Choice CEO Alan Kirkland said.

“The reality is that people are borrowing up to $30,000 for things like solar panels and cosmetic surgery with no proper protections,” Mr Kirkland said.

BNPL is also increasingly being used to pay for essential items like groceries, utilities and child care.

The BNPL companies typically make money from charging businesses a fee to provide the service, or through late fines when customers miss a payment.

Because of a legal loophole BNPL is not regulated under the National Credit Act, because they do not charge interest on repayments. Instead BNPL follows an industry code of conduct.

Australia has led the BNPL boom. Fintechs like Afterpay and Zip Co are the two biggest players locally with 6 million ‘active’ customers in December 2020, according to the Reserve Bank of Australia. Smaller players include OpenPay, Humm, Klarna and Latitude.

‘Big four’ banks like CBA, as well as PayPal and Mastercard, are also trying to get in on the action.

In December Barclays announced it was partnering with Amazon to launch a new BNPL product for online shoppers in the UK, after launching a similar product in Germany.

Governments are now playing catch-up on how to regulate the industry.

In Australia the federal government has announced it would introduce regulations for BNPL and other payment systems by the middle of 2022, but with an election and change of government, they may stall or delay this plan.

Managing debtors and cashflow are key elements of any successful business. At TCS we can help you retrieve your money from your debtors and manage the situation professionally allowing you get to preserve your relationships and get on with the job at hand.

We recognise that every business and every case is different. We invite you to contact us directly for a confidential and obligation free chat about the best was to approach your specific needs.

With over 140 years’ experience in debt collection and credit management in the Tasmanian marketplace, we have the right people, tools, and knowledge to make a difference to your bottom line. Get your debts under control quickly and easily by engaging our services.

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