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over time, receiving the item once all payments were re-
Insider’sreport ceived. BNPL is like those layaway plans, only the purchas-
on payments er gets to take the item home from the get-go, covering the
cost with weekly or bi-weekly payments over a predeter-
Regulatory outlook is mined period, commonly 30-days.
Consumers pay no interest for BNPL, provided the pur-
mixed bag for BNPL chase is paid off over the agreed to period of time. Mer-
chants pay anywhere from 4 percent to 8 percent to BNPL
companies, far and above even the highest interchange
By Patti Murphy rates. Yet, they complain about interchange. Hmm.
ProScribes Inc. The five largest providers of BNPL loans—Affirm, After-

he UK government is bucking to become the first pay, Klarna, PayPal and Zip—combined originated 180
to regulate buy now, pay later (BNPL) compa- million BNPL transactions worth $24.2 billion in 2021, ac-
cording to the Consumer Financial Protection Bureau. Re-
nies, those financial technology firms that have
T been trying to siphon off credit and debit card searchers at Research and Markets estimate that the global
BNPL market is growing at a compound annual rate of 28
payments at the POS.
percent.
Meanwhile, here in the United States, the Consumer Finan-
cial Protection Bureau has decided on a wait-and-see ap- If that's the case, Americans can be expected to rack up
nearly $40 billion in BNPL transactions this year, equal to a
proach to regulating BNPL.
successful merchant card portfolio, but a drop in the multi-
In the UK, the Treasury Ministry drafted legislation that trillion dollar bucket that is credit and debit card payments.
would require registration of BNPL firms with the Finan- Consumer Reports found that in the first seven months of
cial Conduct Authority, a non-governmental body that
regulates financial services firms. It also sets forth require- 2022 the number of Americans using BNPL at least once
had jumped from 18 percent to 28 percent.
ments, such as the performance of affordability checks to
determine whether a consumer has the means to repay the Mixed messages from Washington
money. Also, the legislation calls for advertisements for
BNPL to be fair, clear and not misleading. And the legisla- "A common misperception of buy now, pay later borrowers
tion provides for a consumer complaint mechanism. is that they lack access to other forms of credit," said CFPB
Director Rohit Chopra. Not so. A report released earlier
The UK government has been working up a BNPL regula- this month by the consumer watchdog agency reveals how
tory scheme for about two years and published a "consulta- BNPL customers are heavy users of credit, especially high-
tion" paper last summer indicating how regulation might interest credit, like payday loans and pawn loans.
play out. In the meantime, the FCA has assumed a get-
tough approach to supervising BNPL firms already, taking Some experts have expressed concerns that some consum-
many to task for promotions deemed unclear, unfair and/ ers are racking up too much debt with BNPL. Consumer
or misleading. Reports reported that 10 percent of borrowers were paying
off four or more BNPL purchases; 18 percent of those re-
Plans are for a two-year transition period once the legisla- ported missing at least one scheduled payment.
tion is approved. During that time, companies already of-
fering BNPL in the UK will receive temporary permissions A CFPB analysis found charge-offs of BNPL loans jumped
to continue. to 3.8 percent in 2021, from 2.9 percent the year before. Dur-
"The government is ambitious that the legislation for the ing that same period, credit card charge-off rates for the
regulation of BNPL products will be laid before Parliament 100 largest banks fell from 3.59 percent to 1.56 percent, ac-
during 2023," the international law firm Sidley Austin stat- cording to the Federal Reserve Board.
ed in a blog post.
The latest report from the CFPB on this topic revealed that
Australia is also looking into BNPL. In November 2022, BNPL customers tend to exhibit higher levels of financial
the Australian government outlined three options to "close distress, and that they typically are more highly indebted,
the regulation gap" on BNPL. It is considering stronger in-
dustry self-regulation, as well as some type of government
regulation that mirrors rules the credit card companies op- Unlike legacy BNPL services that
erate under. originate new loans, the two companies

Does BNPL encourage over-indebtedness? have figured out a way to leverage
existing credit card balances to offer zero
BNPL has been around, in one form or another, for genera-
tions. I recall as a child my mother would make purchases percent interest installments.
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