The final day of Money 20/20 Europe opened with a topic hot on everyone’s minds, with the session titled ‘what’s next for buy now pay later (BNPL)?’ As the UK and other governments have started dipping their toes into regulating this form of credit, this panel discussed what needs to be done make this tool sustainable and beneficial to consumers.
The panel included Ruth Spratt, UK country manager at Zip, Clare Gambardella, chief customer officer at Zopa, and Alice Tapper, financial expert and author of Go Fund Yourself.
“It's a very exciting space. It is a growth space,” commented Spratt. “It is a product that customers love to continue to love and continue to use in their millions globally. So you know, it's not going anywhere.”
Gambardella discussed the current position of BNPL: “We are seeing a situation where the proportion of customer outcomes is not as positive as we would want it to be. And I think that's really due to issues around affordability, around the transparency of the agreement that the customer is entering into, and also the tools and the education that customers have to manage debt at the point that they take it on, in what can be quite a fragmented environment.”
When asked about the perception of BNPL as a “healthy” form of credit, Tapper stated that “when it comes to good and bad credit, I don’t think it comes down to the products specifically. The utility of credit is in what it enables people to do and how much it costs them. A great use case for BNPL is if someone would have otherwise had to take out a payday loan and it’s an item that they need or that it is going to add value to their life. We know that people are not yet using BNPL in that way.”
Looking at one of the potentially necessary next moves for BNPL, Gambardella stated: “I think affordability checks have two really important roles to play. The first one is making sure that the credit that the customer is taking is affordable. I agree that some people do just use it to spread payments for money that they have, statistics that came out a few weeks ago suggest that between a third and a quarter of people miss payments or make late payments at some point during their BNPL journey. That's a pretty high proportion.”
She continued that “the second important thing is when affordability checking is not being done, then credit record reporting is not being done in a coherent way, which dilute the accuracy of credit reports for other lenders. So when people are issuing credit cards or issuing loans, they don't necessarily have a full picture of the customer's credit. That makes it easier for customers to not only take additional BNPL debt, but also to potentially take on other forms of debt that they might find difficult to service.”
Tapper brought up the importance of disclosing this as a form of credit, arguing: “I think a lot of the time we use this line about financial education being really important in schools because then it means that people make better decisions. Actually, whilst that would be great, I think it's putting too much of the onus on the consumer. Really, you need to make sure there's good quality information at the point at which people are using financial products.”
Regarding the legislation going forward Spratt stated: “The whole point of the regulation about giving the consumers protections is the right thing to do. If our systems and processes don't work in the ways that they are intended, then customers should have the right recourse. However, with the Financial Ombudsman specifically, a case costs £750, no matter what the outcome […] that’s not proportionate.”
Spratt continued: “It should be proportionate, it should be fair, it should be on the side of the consumer, but it should include all payments of short term credit.”
Gambardella added that the “key three things I think of, are affordability, standardised credit reporting, and protection for consumers who get into difficulty.”
Tapper concluded with a challenge to regulators: “I’d also want to just challenge regulators in general to be a little bit more forward thinking around kind of pre-empting technologies like this.”