Syed Imran Haider 
The new Labour government in Britain will soon reveal updated plans for regulating the ‘buy now, pay later’ industry.
A spokesperson for the government’s Treasury Department said that they plan on doing so soon. On Wednesday, the new economic secretary, Tulip Siddiq, had said things along the same lines.
The Plans
The Treasury spokesperson said that regulating the Buy Now Pay Later products is crucial for bringing certainty to the sector and also for protecting people.
Siddiq had been appointed as the new city minister after the Labour party enjoyed a landslide victory in the elections.
Earlier this week, he had told lawmakers that the new government was planning on closely working with the stakeholders and would outline its plans.
This comes after there have been multiple delays in the process of development regulations for the BNPL sector in Britain.
It was in 2021 that the government had first outlined plans for regulating the sector. Christopher Woolard, the then-boss of the Financial Conduct Authority (FCA) had conducted a review.
The review highlighted that more than 1 out of 10 customers of BNPL services were in debt.
BNPL
The buy now, pay later concept offers people flexible credit arrangements that allow customers to buy an item and then pay off their debt later.
Under most plans, customers are required to pay one-third of their purchase value upfront and then pay the remaining after two months.
Most BNPL firms charge fees on every transaction to their merchant partners instead of charging late payment fees, or interest.
However, some BNPL companies do charge clients fees for missed payments. But, there is no standard model to be followed here.
Considering the disparity in services that exists between different BNPL companies, people have been calling for regulation of the sector.
Another reason why there is a need for this regulation is because many people, mostly young consumers, have been racking up debt due to these plans.
They use various providers and this leads to a rise in debt, which they cannot afford.
The Risks
Most people turn to three to four BNPL providers and this pushes up their debt. Even though BNPL is regarded as a credit innovation, it is not sustainable in the long run.
It had been introduced when the interest rates had been very low, but now with interest rates rising, it has become incredibly risky.
The economy has weakened, which means there are greater chances of defaults. The adoption rate of BNPL services has risen, but this also means debt burdens have increased.
Therefore, it is highly likely that the FCA will introduce regulations for the BNPL industry within the next two years.
Under the Conservative government, there had been multiple delays in terms of BNPL regulation. There was a lot of political instability in the UK that saw three prime ministers in 2022 alone.
Likewise, some big names in the industry have also increased their lobbying efforts. While some rules do exist for the industry, more are needed for properly protecting consumers.
