Friday, June 24, 2022
What factors are driving BNPL growth in the UK and other regions?
The COVID-19 pandemic was the driving force that accelerated the popularity of BNPL allowing consumers under financial pressure to continue to buy their usual products and make payments over time. The biggest draw and continued driving force is the opportunity to not pay any interest on delayed payments, which is very attractive to the consumer, as well as receiving items before completing a full payment and faster sign-up than credit cards.
What differences and similarities have you seen between UK and US BNPL implementation?
The U.S. currently has no regulations in the pipeline for BNPL, but the UK has taken the first step of assessing the fairness and transparency of BNPL terms under the Consumer Rights Act 2015 and has a clear intention of bringing BNPL products into a regulated legal framework.
What are some adverse effects of BNPL on consumers and small businesses?
Buy now, pay later has allowed consumers to spend more than they can realistically afford, and while BNPL started as a convenient way to purchase larger items, consumers are now using it to pay for everyday essentials such as food. With the current rising cost of living, individuals struggling to make ends meet can end up in financial harm. This is not only damaging for consumers, but also the businesses that have increasingly relied on BNPL to boost sales.
Was there a tipping point that led policymakers to propose new guidance?
A report came out last year that found UK consumers owe an average of $257 per person to BNPL and I think this was shocking to policymakers. Regulations are needed to protect consumers and small businesses, and I don’t think the U.S. is far behind in implementing regulations, as well.
What regulations are being proposed and how likely are they to become law?
The Consumer Financial Protection Bureau Director (CFPB) Rohit Chopra is expected to propose BNPL regulations on a federal level and work with state regulators to determine BNPL and other fintech practices. While the specifics of future regulation remain vague, officials acknowledge the urgency to place restrictions on BNPL plans in order to protect consumers' businesses.
To that end, much of the current and proposed regulation on BNPL plans considers these services to be classified as loans.
How will the proposed guidelines protect consumers and small businesses?
The primary danger consumers face with BNPL plans is overextending themselves. The CFPB is wary of the potential accumulation of debt, regulatory arbitrage, and data harvesting. Small businesses also face risks if providers fail to sufficiently disclose their resolution process or fees. Future regulation will seek to protect consumers and businesses by implementing safeguards to combat the possible adverse effects of BNPL plans.
What advice do you have for BNPL providers for maintaining best practices?
Providers should implement a system so that they can hold their customers accountable for completing their payments on time. Consumers are excited to make their purchase, but need to hold up their end of the bargain to finalize those transactions with the business. 
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