Growing push for regulation on Buy Now Pay Later

As more and more Australians reach for Buy Now Pay Later (BNPL) accounts to facilitate their spending, concern grows around the lack of regulation over the market. 

The 2022 Mozo Buy Now Pay Later Report has found that Australians spend an average of $2,208 annually on BNPL platforms, with 82% citing ‘ease of login’ as their main reason for splitting their spending. But what these providers offer in ease, they lack in regulation: BNPL companies have been legally distinct from credit cards and personal loans, and do not fall under the same laws.

New financial services minister Stephen Jones has confirmed in an interview with The Guardian that the government plans to bring in regulators to the BNPL market. Intending to govern BNPL under credit laws, the minister has said that the government will “welcome the fact that they’ve [BNPL providers] introduced a code, [and will] move to legislate it and fill out any gaps”.

What does this mean for the state of Buy Now Pay Later?

This comes at a key time for BNPL as a market, with an explosion in providers entering the fray. For example, longer standing brands in the industry, such as the Swedish-owned Klarna and Australian giant Afterpay, have been joined by forays by Australia’s big banks: NAB, Commonwealth Bank and ANZ offer BNPL services of their own, along with card issuers like Mastercard. 

Apple’s recent announcement of their intention to enter the BNPL space has also made waves in the industry. The US trial will be integrated into the Apple wallet, a built-in feature for Apple devices. Apple’s dominance in the tech field is sure to strike up some serious competition with existing platforms. 

Though options continue to expand, so too does financial education around the impacts of BNPL and missed payments. The fee-free nature and ease of access of many BNPL platforms has long made them seem “too good to be true” to many, but with 1 in 5 Aussies cutting back on essentials to make BNPL repayments, the reality is setting in. With missed payment revenue totalling $43 million for providers in the 2018-2019 financial year, more and more Australians are finding themselves in this new form of debt.

Klarna - who last week issued job cuts equivalent to 10% of their workforce - last year announced changes to wording to clarify their status as offering credit. Suggested changes to regulation could see this type of change become far more widespread.

Looking to make an informed BNPL choice? Check out the best BNPL providers with our Experts Choice Awards, as well as our guide to the dos and don’ts of shopping with Buy Now Pay Later.