The industry reacts: BNPL placed under tighter FCA regulation

By Aisling Finn on Tuesday 2 February 2021

Alternative Lending

Following months of speculation about a regulatory overhaul, fintech leaders react to the Government’s decision to pursue stricter rules for BNPL. 

The industry reacts: BNPL placed under tighter FCA regulation
Image source: Andrea Piacquadio/Pexels

The world of fintech has been abuzz this morning as news broke that the hotly-anticipated Woolard Review had finally been published.

The review, which was commissioned in September 2020, concluded that buy-now-pay-later (BNPL) firms and other unsecured credit businesses had gone unregulated for too long and called on the FCA to introduce more stringent rules for the sector.

There have long been calls for the BNPL market to be regulated, most recently a group of cross-party MPs joined forces to bring a bill before Parliament calling on the FCA to implement tighter regulation in the sector, a bill which has since been rejected.

Read More: Klarna and other ‘buy now, pay later’ firms set for UK regulatory clampdown 

But what does the fintech industry think about this morning’s announcement? 

Here are the latest comments from fintech heavyweights, influencers and even leaders at the helm of BNPL firms:

Philip Belamant, CEO and founder of BNPL lender Zilch: 

Zilch supports and welcomes the calls for regulation across the industry. Responsibility must be at the heart of lending, with no exceptions. Zilch was born with regulation at its core, it has been part of our DNA from the start and that has resulted in us being the first fully FCA regulated Buy Now Pay later provider in the UK.

To achieve this, Zilch entered the FCA’s innovative Regulatory Sandbox Programme to work hand in hand with the regulator on its unique consumer-focused approach to buy now pay later. This allowed Zilch to seek advice from the FCA, get their oversight and guidance on our initial testing and ultimately ensure we were building a model that is not only profitable for our business but, importantly, one that works for our customers too.

Charlotte Crosswell, CEO of industry group Innovate Finance: 

The findings of the Woolard Review are an important first step in understanding how the landscape has changed in the unsecured credit market.

With the significant growth of e-commerce and wider customer adoption of digital finance, more and more consumers are taking advantage of the diverse range of FinTech services on offer to help them manage their finances. Interest-free buy-now-pay-later plans have been very popular, but we will need to ensure that consumers are fully protected. They need visibility and understanding of the total credit they are taking on, to ensure that it doesn’t cause individual issues going forward. 

Rapid growth in any new sector can pose regulatory challenges, and we recognise the need to develop a fair, transparent and proportionate approach to regulating new forms of credit. Innovate Finance welcomes this response and looks forward to working with the FCA as regulation develops.

Damian Kassabgi, executive vice principal of public policy at BNPL lender Clearpay: 

We welcome today’s recommendations and look forward to working with the FCA, the government and stakeholders to build on the consumer protections we already provide to create the right regulation for the sector.

It has always been Clearpay’s view that consumers will be best served by products designed with strong safeguards and appropriate industry regulation with oversight from the FCA. We are pleased that many of the suggestions we put forward in our submission to the Woolard review have been acknowledged and that the review has recognised the diverse nature of the industry.

Luke Massie, CEO and founder of payments app VibePay: 

The pressure of keeping up with social media trends combined with the easy access to capital was always going to end badly for the majority of younger consumers. The absence of regulation has resulted in many being influenced by the marketing campaigns of the leading buy now pay later firms, with messaging glamourising credit and not educating on the risks, such as the impact significant debt and poor credit scores will have on their choices later in life.

We have continued to inform our audience of the risks of buy now pay later and we welcome the news from the FCA to enforce stricter regulations on this sector.

Simon Taylor, head of ventures and co-founder of consultancy 11:FS: 

BNPL is innovative and if used correctly it could very much work in consumers’ favour -  being able to buy something at the same price but spreading the cost over a number of months, can be beneficial. And for a vast majority, BNPL is a convenient way to manage delivery risk, try before they buy, and smooth out payments. But whether all consumers realise they’ve just acquired debt, is a separate issue.

Today’s announcement from the FCA means consumers should benefit from the same protections as they do with other debt products. Hopefully, this new regulation will be open to new ways of outcome-based consumer protection, rather than assuming that displaying APRs and wordy T&Cs will solve the issue.

With open banking, we have new tools to verify consumers’ affordability and creditworthiness, which gives the industry the opportunity to avoid a repeat of overdraft regulation, where it was assumed a one-size-fits-all approach works when it clearly does not. If the industry and the FCA work together this will result in customers being far more educated and really understanding the debt they’re taking on.

Read More: Klarna and other ‘buy now, pay later’ firms set for UK regulatory clampdown 

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