We’ve reported that regulators around the globe, including in the UK, were ready to regulate buy now, pay later. And likely as a credit product similar to consumer loans and revolving credit accounts.
Over the past week, however, we’ve seen reporting that regulators in the UK have gotten cold feet at the notion of regulating BNPL, an industry dominated by players like Klarna and Afterpay (now owned by Block).
The reason for the cold feet? Apparently, politicians in the UK are concerned that by regulating BNPL they may inadvertently remove a low-interest credit option from the marketplace.
In other words, the UK government fears that by declaring BNPL credit, it will chase this form of credit out of the market. Given these are politicians, the real fear is the response consumers would have to such a move. Or perhaps they were feeling pressure from the BNPL lobby.
10 Billion Reasons
BNPL is pretty popular in the UK. According to Payments Journal, UK consumers have taken out about GBP 10 billion in BNPL loans over the past three years.
The UK government had reportedly been planning to regulate BNPL under the Financial Conduct Authority. It’s unclear from the coverage we have seen whether the government is killing the regulatory plan entirely or merely tapping the breaks in a fit of nerves.
Despite the UK’s apparent hesitancy, regulators around the world continue to hone in on BNPL. Australian regulators, for example, recently began regulating BNPL as a credit product, just like loans and credit cards.
The voices of BNPL critics have gradually grown louder. For example, financial advice guru Dave Ramsey, who I like to describe as everyone’s grumpy dad, recently declared that taking out BNPL loans is a good way to stay broke.
Long Overdue?
For many observers, the regulation of BNPL has been a long-overdue inevitability.
“There is a realization by gov that this requires oversight and consumer protection,” said Accrue Savings CEO Michael Hershfield.
Ep. 30 Unlocks Savings Culture with Accrue CEO Michael Hershfield
Hershfield’s company offers a save now, buy later solution [SNBL], which is kind of like BNPL in reverse. Rather than taking possession of goods and paying for them later, as BNPL does, SNBL lets consumers save for a purchase over time. The consumer takes possession at the end of the process.
In a recent interview on Localogy’s This Week in Local podcast, Hershfield said he launched his company in 2021 – during the tail end of Covid – after he noted a dearth of savings-based consumer payment options amid a plethora of credit-based options, including BNPL.
“I remember during the pandemic being overwhelmed with credit options – buy now pay later being one of them,” Hershfield says in the interview. “I felt very uncomfortable that there was not a savings option.”
