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The AltFi view on BNPL regulation: Haste is needed
High octane growth in the sector is impressive but clarity is needed as to how, when or if new regulation is coming.
AltFi Weekly Leader
There is no doubt ‘buy now, pay later’ is one of the hottest fintech trends in 2021. A huge amount of interest - and investors’ dollars’ are bubbling away in the sector.
In tandem with this exponential growth is a growing expectation that new regulation is being formed, at least here in the UK. At present, an existing loophole in consumer lending regulation provides some space for operators to act within but the Financial Conduct Authority at the start of 2021 announced plans for specific new regulation.
“By announcing plans to legislate to bring interest-free buy-now-pay-later into regulation, the government is acting swiftly to ensure people can continue to benefit from these products with the right protections,” a Treasury statement said at the time.
The only question then is, is why is it taking so long to be announced?
Of course, hurried regulation in the financial sector - particularly in fintech - is not necessarily a good thing. But leaving it too late can be damaging. For businesses as well as consumers.
Last week, Citizens Advice ( a consumers rights’ charity) revealed research showing One in 10 Buy Now, Pay Later shoppers have been chased for missing payments, rising to one in eight young people.
This came after weeks of attention-grabbing headlines showing just how big a force the underlying idea is becoming around the world. Square made a $29bn bid or Afterpay.
Affirm saw its share price soar after a deal with Amazon. Newer players such Laybuy and Butter too are gearing up for strong growth with new product features.
Further M&A and a likely slew of IPOs are overtly on the cards including the potential for a huge IPO of one of the sectors biggest names, Klarna.
Clarity on the new regulation will help the sector and consumers. With the market in a period of high octane growth, every day counts to spur innovation as well as consumer protections for vulnerable customers.
The AltFi Leader is a new weekly view for 2021 from our editorial team. We’d love to hear your ideas, thoughts, feedback and constructive criticism: editorial@altfi.com
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