CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

Will stronger regulation be boon or bane for BNPL share prices?

ASX-listed members of the BNPL sector are divided in their responses to calls for regulation of the sector that could put platforms under the same obligations as credit card providers.

Source: Bloomberg

ASX-listed Buy-Now-Pay-Later (BNPL) companies have voiced disparate responses to recent calls for the launch of stricter regulation that could have an impact on their share prices.

While MoneyMe has backed the strongest recommendation made by a recent Treasury options paper, Zip has voiced objections on the grounds of the 'large impost' it would create for operators.

Rapid growth prompts calls for stricter regulation

The Australian BNPL sector has seen strong growth in recent years, by making credit products more accessible to consumers that are often neglected by established financial institutions.

Key features of players in the sector include the provision of interest-free credit products, as well as the use of fintech innovations to make products more accessible to consumers by embedding them in the purchasing process.

Figures from the Reserve Bank indicate that the value of BNPL transactions grew by around 37% in 2021/22 to $16 billion. The number of active Australian BNPL customer accounts also increased by 2 million accounts over the year to June.

According to research from the Australian Finance Industry Association, as of March 2022 55% of people aged 18 - 24 had used BNPL, while the figure for people aged 25 - 35 was 58%.

This rapid growth has prompted calls for better regulation of the BNPL market, particularly given concerns that people under financial duress are more inclined to make use of BNPL.

Towards the end of November, Treasury released an options paper outlining three regulatory options for the BNPL sector.

The first option is stronger self-regulation and testing for affordability, while the second recommendation is to partially bring BNPL providers under the remit of the National Consumer Credit Protection Act. This would require that providers obtain Australian credit licenses and step up industry codes.

The third option is to bring the sector completely under the Credit Act, applying to BNPL platforms the same responsible lending requirements that are currently in force for credit card providers. According to a report from Fairfax, over a dozen consumer groups, charities and community legal centres have voiced their support for the third option, because the first two options would leave room for legal loopholes.

MoneyMe backs BNPL regulatory push

ASX-listed online lending platform MoneyMe has voiced its support for the third recommendation proposed by Treasury, even if it means eroding the competitive advantage that BNPL products currently enjoy compared to other lending options.

MoneyMe CEO and managing director Clayton Howes said to The Australian that the move would 'level the playing field in the industry' as well as help to protect consumers by removing 'blind spots' for lenders.

'[Regulation] has got to create a fair approach for lenders and customers and for me, being fair we need to have the reporting standard so that we don't have blind spots,' Howes said.

'Accurate and extensive credit reporting allows lenders to be more accurate in our credit decision and, in turn, helps to protect consumers.'

Zip voices objections

Unlike MoneyMe, Zip has expressed objection to the third option because of the 'large impost' it would create for BNPL platforms when performing affordability verifications. This would require checking one or multiple sources of financial information, including payslips and bank statements.

Zip co-founder Peter Gray said that while the company would only need to make minimal adjustments to its operations to satisfy the requirements of the third recommendation, other regulatory options were still preferable.

'We have demonstrated we are able to deliver that in terms of our regulated product,' Gray said to Fairfax. 'It's more we're advocating for fit for purpose regulation for the broader industry.'

Take your position on over 13,000 local and international shares via CFDs or share trading – all at your fingertips on our award-winning platform.* Learn more about share CFDs or shares trading with us, or open an account to get started today.

* Winner of ‘Best Multi-Platform Provider’ at ADVFN International Finance Awards 2022

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.