• The Treasury has just released a proposal paper on how to regulate the BNPL sector
  • There are three proposals under consideration
  • Here’s how ASX BNPL stocks reacted to the news

The Albanese government has released a discussion paper this morning that’s expected to tighten the regulatory screws on the Buy Now Pay Later (BNPL) sector.

The Treasury has put forward three options to the Government and industry for assessment.

Under one of these three options being proposed, BNPL providers might be asked to obtain a credit licence and meet responsible lending obligations, which includes a new “affordability test” for new customers.

Under this test, customers would be rejected if it was likely they would not be able to repay their obligations. At the moment, no such credit checks are being performed by most BNPL providers.

The most lenient option put forward by the Treasury paper was to introduce additional self-regulation for the industry.

The harshest proposal meanwhile was to bring all BNPL companies completely under the Credit Act, similar to that currently expected of credit card companies.

Other issues discussed in the Treasury paper include excessive consumer fees and charges, which the document stated “may be disproportionate compared to the value of credit provided”.

Financial Services Minister Stephen Jones said there were 7 million BNPL accounts in Australia, and most users were in the 20-35 age bracket.

“It appears that there is a small percentage of the market where people are getting into hot water,” Jones told the Nine Network.

“They love the convenience of buy now, pay later, but they want to know it’s safe. We need to find that happy medium, balancing consumer protection with innovative new products.”

Zip says it welcomes regulation

The reaction of ASX-listed BNPL stocks were mixed after the paper release this morning.

Sector leader Block Inc (ASZ:SQ2), which owns Afterpay, slipped 3% while Zip (ASX:ZIP) rose slightly.


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By all estimates, the BNPL sector is winning against the major credit card companies. A recent report shows that 48% of BNPL users do not own a credit card.

The report says that half of customers preferred BNPL over credit cards because they pay no interest. It also said that in 2021, consumers saved a total of $102 million in interest through using BNPL instead of credit cards.

Zip’s Australia New Zealand managing director, Cynthia Scott, said she welcomes the Treasury’s proposal and believes that it’s time to raise the bar on standards within the BNPL industry.

“Zip supports fit for purpose regulation,” Scott said.

“We have always operated above the minimum standard required, and as the industry grows and matures, it is important that appropriate guardrails are in place to ensure consumers are protected, and innovation and competition against long-standing incumbents are not stifled.”

Scott also said that Zip conducts credit and affordability checks on its customers to ensure its products are appropriate.

“And as a result, we have very few customers in arrears or hardship, and generate less than 1% of our revenue from late fees,” she said.

Minister Jones said the industry will be consulted on these new proposals, and will be given until December 23 to respond to the Treasury paper.

The new legislation is expected to pass before the end of 2023.

At Stockhead, we tell it like it is. While Zip Co is a Stockhead advertiser, it did not sponsor this article.