The buy-now-pay-later (BNPL) sector has to persuade authorities and customers that it is a secure alternative to established lenders in order to challenge the traditional credit card market. That is a lot to ask.
Alternative lenders have made the charge over and time again that traditional lenders treat their consumers unfairly, even implying that millennials dread traditional lenders more than they fear death. And not just the BNPL companies share this opinion; in January, the UK's Payment Systems Regulator fined Mastercard £31.5 million, giving yet another severe damage to the industry's reputation.
That does not, however, imply that the BNPL Market is unaffected. authorities and consumer watchdogs spent a significant portion of 2021 warning about the new
Gareth Shaw, head of money at consumer advocacy organization Which?, tells Verdict that "the risk" is that individuals don't truly understand what they're getting into. They are unaware of their debt and the consequences of using one of these scams, according to the author.
Citizens Advice issued a similar alert in September, noting that one in ten customers had been pursued by debt collectors and that UK BNPL buyers had been charged £39 million in late fees over the previous year. Due to the stress and insomnia these customers had as a result of the debt, they had to borrow additional money to pay it off, thereby aggravating their financial predicament.
The Woolard Review of innovation in the UK market for unsecured consumer credit, released in February 2021, also cautioned that the BNPL industry suffers from a lack of affordability checks, clear information on product and credit agreements, and inconsistent treatment of people who have financial difficulties. The analysis forewarned that any of these elements may cause customers' financial health to suffer significantly.
Christopher Woolard, the review's author, stated in the study that although the introduction of unregulated BNPL products has given consumers a useful alternative to payday loans and other kinds of credit, BNPL also poses a serious risk to consumers.
These kind of reports have heightened concerns about the dangers of unregulated credit agencies and increased calls for BNPL regulations to be made more explicit.
