The Growing Calls for Regulation in the BNPL Industry: How Consolidation Provides the Answer

Buy Now Pay Later(BNPL) – Point of Sale (POS) Consumer Finance – fueled by the easy, convenient and digitally enabled payment and credit value proposition deployed by FinTech companies.

But banks, traditional lenders and payment processors are increasingly moving into the space to support growing market demands and compete with fintech companies that have already shifted $8-10 billion in revenue away from banks.

In light of this growth, Jacob Martin, CEO and Co-founder of Gifty It discusses the growing calls for regulation in the BNPL industry, and how consolidation provides the answer.

Jacob Martin, CEO and Co-Founder of Jifiti
Jacob Martin, CEO and Co-Founder of Jifiti

While BNPL Attracts the retailer growthIt has also attracted greater interest from payment companies and banks, which has led to a string of acquisitions in recent months; Square Spent $29 billion to buy After payment, Paypal Pays $2.7 billion for Japanese beginners driven, And Goldman Sachs I buy green sky for $2.2 billion.

These recent acquisitions and consolidations are bold indications that BNPL The market is booming – and more growth In sight. But as the number of brands and users in BNPL The arena continues to grow, and the nature is largely unorganized BNPL The explosion attracted the attention of the organizers.

Financial regulators stand up and take notice, not because of merge Same but because these collaborations are an indication that industry It is one to be taken seriously and is here to stay.

Regulations have jumped to the top of mind

that industry It becomes of interest to the regulator when the debt cannot be traced, the sector shows signs of it growthAnd the big names are jumping on the bandwagon.

“It’s going to get more organised,” he said, “and it has to be more organised.” Mark Barnett Master Card President of Europe, in an interview with Financial Times. “No one wants consumers who are overburdened with debt. The people best able to make sure that consumers are able to pay are the banks.”

Fintechs understand this fact, and collaborating with already regulated banks is a tactic that could serve fintech companies well when the time comes for compliance. for example, Lloyds Bank It is best known for partnering with fintechs and has spent £4 billion over the past few years on large-scale digital transformation projects.

In February 2021, a government review of unregulated consumer credit conducted for the UK’s Financial Conduct Authority (FCA) highlighted the BNPL industryexponential growth Need regulatory oversight. The action plan released in July stated that one of its top priorities for the coming year would be to ensure that consumer credit markets function well by reviewing consumer credit in areas such as BNPL section.

The UK government wants to regulate BNPL in a way that is proportional to the risks and is looking for feedback on how to do so.

Meanwhile, Treasurer of Australia, Josh Frydenberg, He recently announced several proposals to update the Australian regulatory framework for payment systems, including BNPL, which has remained largely unchanged over 25 years. this is will Allow the government to oversee payments policy and retain sovereignty over payment systems. If the Australian government strikes the optimal balance between regulation industry Without stifling innovation, this could serve as a roadmap for regulation in other countries.

Because of these recent updates, and since over 17 million UK customers are using it on their own BNPL To make purchases online, this is a clear indication that governments are feeling the heat industry And you want to enforce the regulations so that consumers can ultimately benefit.

merge To meet changing demands

As more people enter the digital economy, payments and consumer finance are evolving, providing greater flexibility in payment and cash flow management while enabling retailers to offer modern and innovative payment methods at checkout.

Moreover, due to clients’ demand for integrated experiences, the trends of embedding finance and banking as a service – where non-banking firms provide financial services – are increasing. Takes IKEA2021 announcement of its purchase of 49% of its banking partner, Ikano Bank.

Banks are studying the different roles they can play, and are wondering if they are distributing products through partners will threaten customer relationships. There is also the value alignment issue; Banks are increasingly considering whether third-party financial services are in line with responsible lending and other core banking values. As a result, many are looking to solutions that give them direct access to merchants and consumers.

To meet the changing consumer demands mentioned above, there has been a rise in merge and partnerships in BNPL industry During the past 12 months.

The idea behind these mergers of fintech companies and banks is to bridge the gap between merchants, consumers and lenders in a safe and efficient manner. For example, by partnering with a white label BNPL Solution provider, banks can seamlessly integrate BNPL Offers in their consumer financing programs and help merchants integrate BNPL on their clients’ journeys in a responsible manner.

Fintech companies benefit from collaborating with banks by meeting upcoming regulatory requirements, but what will banks gain? It all boils down to technology. Banks are collaborating with fintechs to bring their already compatible products and services to the point of sale at the speed and speed of fintech. To catch up with large-scale merchants and move forward in the direction of industryBanks need to partner with the broader consumer finance ecosystem to offer innovative financing solutions and payment options as consumers look for them.

With a jump in interest from regulators last year, especially Consumer Financial Protection Bureau Audit of .’s business practices Confirms, after payment, Klarna, PayPal and zoom, There’s a clear reason we’ve seen a spike in mergers and acquisitions. It’s a win win situation; These partnerships benefit both fintech companies and banks in the long run and quickly resolve any regulatory issues. this is will Consumers ultimately benefit by giving them access to responsible, accessible and affordable financing solutions.

  • Polly Jane Harrison

    Polly is a North Wales journalist, content creator and opinion-maker. She has written for a number of publications, usually hovering around the topics of fintech, technology, lifestyle and body positivity.

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