Metrics Monthly Q1 | 21

Go to contents page

As a reaction to the review, the Gov- ernment pledged to introduce the leg- islation necessary to bring BNPL prod- ucts under FCA regulation as a matter of priority. Economic Secretary to the Treasure John Glen said they would be bringing in 'the same protections you'd expect with other loans'. The Governments' swift response to the review could indicate a desire to get ahead of the game and prevent the UK falling into the same disarray as has already been seen in Australia, where BNPL has been booming with platforms like Afterpay and Zip Money reaping the rewards. Debt helplines down under have seen a huge rise in people accumulating significant debt on BNPL platforms, and prioritising these repayments over other essen- tial items or loans because of fears of being restricted from using the apps.

Unlike in the UK, however, Australian regulator the Australian Securities and Investments Commission is struggling to take similar regulatory action to that suggested in the Woolard review. It would seem that BNPL in Australia has found a loophole in the system, with products falling outside of ASIC's remit due to the law that requires a fee to be charged to consumers for their credit to qualify as a loan. BNPL fees are paid by merchants so not regulated as loans, leaving Australians unprotected when they fall into financial hardship from the payment deferral method. Accord- ing to ASIC, many consumers are now struggling to keep up with repayments and cutting back on necessities such as food. It could be said, then, that the UK has learnt a hard lesson from their counter- parts overseas and aims to clamp down on the practice before the industry ends up in a similar situation. The proposed legislation was largely received well, however payments companies claim to be surprised by the concerns. Klarna,

one of the largest online shopping payment deferral options, saw 100% growth year-on-year in the UK but has recently been compared to predatory payday lender Wonga. The lender was notorious for extremely high interest rates, and faced intense scrutiny after a surge of compensation claims, going into administration in 2018 as a result. Klarna CEO Sebastian Siemiatkowsk said he was upset when his company was compared to Wonga: 'Klarna is very different. We've been fighting the bank establishment for years. I'm surprised to see that there's not a more positive response'. But with the industry still picking up the pieces from the payday loans crackdown, it's no surprise that people are skeptical about payment methods that seem too good to be true. What happens next, then, will depend on how soon the Government can move to regulate the BNPL industry, and with lawyers suggesting it could be more than a year before rules are in place, it could be a long road ahead.

Changes are ur- gently needed to bring BNPL into regulation to protect consum- ers, to ensure that there is secure provision of debt advice to help all those who may need it, and to maintain a sus-

tained regulatory response to the pandemic. - Christopher Woolard

Metrics Monthly | 19

Made with FlippingBook - professional solution for displaying marketing and sales documents online