In the news: The rise and fall of 'buy now pay later'

The BNPL credit market is being scrutinised in the UK, while its popularity rises in the US and Canada
by Bethan Rees


The FCA has its eyes set on the BNPL unsecured lending market, according to Oscar Williams-Grut for Yahoo Finance. BNPL allows consumers to buy online and make phased future payments to pay off the cost, entering a minimal amount of details such as their phone number and email address.

On 2 February 2021, the regulator published the Woolard Review, which calls for urgent changes "to bring BNPL into regulation to protect consumers". The UK government said it would hand "new powers to the FCA to control the market" as a response, Williams-Grut says.

Christopher Woolard, former interim chief executive of the FCA and chair of the review is quoted in the article. "New ways of borrowing and the impact of the pandemic are changing the market, with billions of pounds now in unregulated transactions and millions of consumers at greater risk of financial difficulty … changes are urgently needed," he says.

The Woolard Review reports that the use of BNPL quadrupled in 2020, accounting for around 1% of the UK credit market, with over five million people using this credit function since the start of the pandemic. "BNPL providers typically don’t charge interest, meaning they are not covered by existing credit regulation," Williams-Grut says.

Woolard, writes Williams-Grut, says calls for regulation are largely "preventative", following previous payday loans scandals. The Woolard Review suggests BNPL providers should fall under the existing regulation for credit providers, meaning firms could face sanctions and fines for breaching rules and would be required to run proper affordability checks on potential consumers.

Anthony Morrow, co-founder of online financial advice service OpenMoney, is quoted in the article. He says that BNPL schemes make it "very easy to take on debt without fully thinking about how to pay it back", and reports that research from OpenMoney finds that 77% of users have struggled to pay for BNPL purchases.

Yahoo Finance article

BNPL popularity rising in the US

Spending habits for people in the US are changing due to the pandemic, according to Anthony Wright of 23ABC News. The pandemic has "forced millions of Americans out of work, leaving them strapped for cash and looking for ways to manage their budget". One of the ways retailers are adapting to this is with BNPL options.

Sabrina Helm, retail and consumer science professor at the University of Arizona, is quoted by Wright. She explains that BNPL enables the consumer "to take home that product right away for instant gratification or because they really need this product". However, she warns, the consumer should be "fully aware of the rules and fees" before buying. Wright adds: "Some payment options can affect your credit score and others not so much. You should also know the process of making returns and getting a refund if needed."

23ABC News article 

Canada moves into BNPL market

The Royal Bank of Canada (RBC) is joining the BNPL market through a partnership with Alliance Data's BNPL firm, Bread, according to a Finextra article. The bank offers BNPL for big-ticket purchases at online shops in Canada through PayPlan.

Consumers apply by clicking on the PayPlan button at the checkout, and once they are approved, interest rates, terms and conditions and the monthly payment plans "are provided within seconds".

The article quotes Amit Sadhu, VP of personal lending at RBC, who says that the bank is "helping retailers provide greater convenience to consumers through this simple pay-over-time option".

Finextra article

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Published: 04 Feb 2021
  • Fintech
  • Risk
  • unsecured lending
  • debt
  • buy now pay later
  • US
  • FCA
  • Covid-19
  • Canada

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