Will Marle, Executive Director in Banking & Payments at global management and technology consultancy Capco comments on the BNPL regulations which came into effect last week: “The new Buy Now Pay Later (BNPL) regulation which came into effect last week is an important development for the market, bringing products more clearly in line with Consumer Duty expectations and giving customers stronger protections and access to clearer routes for complains and redress.
“BNPL can continue to play a valuable role for consumers, particularly when it helps people manage unexpected expenses or short-term cashflow without incurring interest, provided borrowing is affordable and repaid on time. While the added consumer protection is welcome, it also raises an important question: what happens to customers who no longer qualify?
“Stronger affordability checks may protect some customers from unaffordable borrowing, but they may also exclude customers who are already financially stretched or relying on BNPL to manage everyday essential spending. The risk is that declined customers are pushed toward higher-cost or unregulated alternatives.
“The challenge for BNPL firms will be balancing stronger credit decisioning and vulnerability support with the frictionless digital journeys that have made BNPL attractive to customers.
“There is also an opportunity for banks to play a greater role in this market by using better data, affordability, decisioning and instalment-based products to offer responsible alternatives for customers who may not meet BNPL providers’ criteria.
“Ultimately, the firms that succeed will be those that treat declined customers as thoughtfully as approved ones, with clear and supportive journeys that explain decisions, avoid stigma, use available data to identify vulnerability signals early, and signpost customers to appropriate support before difficulty escalates, helping to deliver better customer outcomes.”