BNPL companies in the UK, including some ASX stocks, will now fall under the UK’s regulatory perimeter.

Some ASX BNPL stocks have made inroads into the Old Dart, most particularly Afterpay (ASX:APT) which operates under the Clearpay brand.

The FCA said its oversight changes were urgently needed as use of BNPL sky rocketed in the UK particularly during COVID-19. The market is now worth £2.7 billion ($4.85 billion), which has quadrupled in 2020, and 5 million Poms use it.

But there are concerns, given the ease of accessibility and lack of credit checks, that it will drag people into debt they cannot repay.

The report, which was part of a wider report into the credit sector generally, has recommended that BNPL firms will have to conduct affordability before lending to customers.

“The emergence and expansion of unregulated BNPL products gives consumers a significant alternative to more expensive credit, but this also comes with significant potential for consumer harm,” it declared.

“For example, more than one in ten customers of a major bank using BNPL were already in arrears. Regulation would protect people who use BNPL products and make the market sustainable.”

The BBC reports the British government will legislate as soon as possible following consultation.

The UK’s move comes at the same time Australian BNPL firms are awaiting a voluntary code of practice set to be published by the Australian Finance Industry Association (AFIA) and become effective from March 1.

To date, there have not been regulations in Australia threatened, let alone imposed, that are severe enough for BNPL players to tighten their lending practices.


ASX BNPLs in the UK say they’re part of the solution

ASX BNPL stocks in the UK said that it welcomed the review and said they would work with the FCA.

However they all claimed they had better protections compared to traditional credit products and even other BNPL companies.

Openpay (ASX:OPY) for example said this morning it had the most flexible terms in the market – up to six months – as well as several mechanisms preventing financial hardship warned by advocates of the review.

“Customer centricity and responsibility are core to Openpay’s business and we ensure our products are designed to be beneficial and fair for consumers providing flexible plans with no hidden catches,” it said.

Afterpay meanwhile echoed these sentiments, noting its model flipped the merchant fees onto the heads of merchants rather than consumers.

“With more than 1.2 million people currently using Clearpay in the UK, consumers are voting with their feet and rejecting traditional credit products which can trap them in expensive long term debt,” it said in a statement this morning.

Today, BNPL stocks were mixed but none moved more than 2 per cent either way. The average stock is up 149 per cent in the last year – excluding stocks that had listed in the last year.

Including Laybuy (ASX:LBY), Payright (ASX:PYR) and Zebit (ASX:ZBT) drags this figure down to 93 per cent.

Code Company Price %Day %Mth %Yr MktCap
HUM Humm Group Limited 1.19 2 5 -42 $574.5M
SPT Splitit 1.43 1 10 132 $633.5M
ZBT Zebit Inc. 1.14 1 17 0 $106.7M
PYR Payright Limited 0.83 1 -17 0 $49.0M
APT Afterpay Limited 145.75 -1 24 278 $41.8B
Z1P Zip Co Ltd. 7.84 -1 48 94 $4.4B
LBY Laybuy Group Holding 1.39 -1 7 0 $244.2M
SZL Sezzle Inc. 8.35 -2 35 326 $868.2M
OPY Openpay Group 2.51 -2 11 107 $212.9M
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