Consumers using buy now, pay later services won’t have legal protection as companies such as Afterpay and Zip are being called to ‘self-regulate’. This comes from an interim report from the Senate Select Committee on Financial Technology and Regulatory Technology.
Buy now, pay later (BNPL) fintech companies have become increasingly popular, with Australia’s leader Afterpay growing by 140% last year with 10 million global consumers using the service. As COVID-19 pushed shoppers online, the sales of the interest-free loan service have increased further, with the share prices growing from under $9 to over $70 in the past six months.
The growth of BNPL businesses has resulted in calls for stricter regulation to legally protect consumers who are using the service, under the same legal obligations other financial service providers adhere to. However, the interim report tabled late on Wednesday, found that BNPL companies should not be governed under the same regulations as the committee “supports self-regulation where innovative products emerge, whilst ensuring strong consumer protection.”
Senator Andrew Bragg said in a speech tabling the report that the “vast majority” of its recommendations had bipartisan support.
“We were not convinced that the way to promote innovation was to force new ideas into old forms of regulation and laws designed for something altogether different,” the report read.
“Because innovation like ‘buy now, pay later’ often occurs on the fringes of regulation, it is inappropriate to force each innovation into a one-size-fits-all approach.”
The push-back against government regulation has been welcomed by BNPL companies, with Zip’s Co-founder and Chief Operating Officer Peter Gray saying:“The committee is absolutely spot-on in its recognition that innovation is too important to be smothered with a one-size-fits-all approach to regulation.
“On this point, Zip is pleased to see the committee acknowledge the importance of self-regulation and the need to create a culture of innovation in Australia.
Afterpay’s CEO Anthony Eisen has also voiced support saying the report “recognises is that customers are responding positively to innovation that delivers better outcomes for them.”
“We welcome the premise that existing regulatory structures would not deliver fit-for-purpose regulation and would be happy to see the BNPL Code of Conduct recognised and used as the basis of more formal regulation in the future.”