Government launches long-awaited BNPL consultation

Ministers have launched the highly anticipated consultation for the regulation of Buy Now, Pay Later (BNPL) firms.

BNPL firms such as Klarna allow users to defer payments post-purchase or pay for bigger purchases in instalments.

The move, which comes two years after the government first agreed to regulate BNPL products, follows research from Forbes which shows that 70 per cent of UK adults are using the payment option as a direct result of the cost-of-living crisis.

It is now consulting on the proposed draft legislation which will bring the payments under regulation of the Financial Conduct Authority (FCA).

The government made the decision to regulate the payment model after the financial watchdog published the Woolard Review, which called for stricter boundaries on BNPL services.

The Review set out how regulation could better support a healthy market for unsecured lending, taking into account the impact of the coronavirus pandemic, changing business models and new developments in unregulated BNPL unsecured lending.

It warned that unregulated BNPL products come with “significant potential for consumer harm,” with at the time more than one in ten customers of a major bank using the payment service already in arrears.

The consultation asks for stakeholders’ views on whether the draft legislation effectively delivers the policy positions set out in the government’s original consultation response.

Gary Rohloff, managing director and co-founder of BNPL firm Laybuy said that the company welcomes proportionate regulation of the sector.

"We need a regime that protects consumers but one that strikes a balance and supports innovation, competition and reflects the lower risk and average purchase size compared to other forms of credit like store cards or credit cards," continued Rohloff.

Stella Creasy, Labour & Co-op MP for Walthamstow, criticised the lengthy gap between the government making a decision to regulate and the recent consultation.

“Today they announce it again as if taking action," she tweeted on Tuesday. "No actual laws means more time for these vultures to target people in cost of living crisis.”

BNPL payments in the UK are projected to grow by over 20 per cent on an annual basis to reach over $32 billion in 2023 and over $55 billion by 2028, according to new research.

ResearchAndMarkets.com estimates that due to the cost-of-living crisis, over 36 per cent of UK consumers have used BNPL more than once, with millennials and Gen Z consumers using the payment method most frequently.

The use of Buy Now, Pay Later (BNPL) services is rising across all UK age groups including pensioners, according to a study by education charity the Centre for Financial Capability (TCFC).

Goodland said that the organisation is concerned about the lack of financial literacy that can lead to further indebtedness which can have a snowballing effect over time.

    Share Story:

Recent Stories


The human firewall: Activating employees to safeguard financial data
As financial services increasingly embrace SaaS and cloud-based technologies, they face emerging threats to safeguard sensitive customer data. While comprehensive IT security measures are essential, the active involvement of employees across organisations is pivotal in ensuring the protection of sensitive data.

Building a secure financial future for instant payments: The convergence of ISO 20022 and fraud detection
The financial landscape is rapidly evolving its approach to real-time transactions under the ISO 20022 standard, and financial institutions must take note. With examples such as the accelerated adoption of SEPA Instant Credit Transfers in Europe and proposed New Payment Architecture (NPA) programme in the UK, the need for swift and effective fraud detection is more crucial than ever.

Data Streaming and Consumer Duty: Transforming customer experience in banking
Introduced at the end of July, the Consumer Duty is a game-changing new set of rules and guidance for financial services institutions in the UK, and companies must look to modernise their systems in adherence with it in mind to create the best customer experience possible.

From insight to action: Empowering financial institutions through advanced technology and collaborative information sharing
The use of Information sharing in enhancing financial crime prevention has been universally agreed as being beneficial. However no-one has been able to agree on how information can be shared safely without breaching data protection laws or having the right systems to facilitate this, Information sharing has re-emerged as a major consideration for financial institutions (FIs) ahead of the Economic Crime and Corporate Transparency Bill being made into law in the UK.