Analyzing the Impacts of Financial Services Regulation to Make the Case That Buy-Now-Pay-Later Regulation Is Failing

Abstract

Fee-based Buy-Now-Pay-Later services (BNPL) are becoming widely adopted in many developed countries, including Australia. Across a variety of regulatory approaches there appears to be relatively minimal regulatory coverage of fee-based BNPL. This review applies a results-oriented, behaviourally informed market failure approach to assess the regulatory outcomes of fee-based BNPL. The review makes the case that the impacts of the regulation of fee-based BNPL in Australia demonstrate multiple forms of regulatory failure. The regulatory failure is particularly due to regulatory capture at a broad level and especially in terms of a lack of consumer protections. Consumers may particularly need consideration and protection because understanding the increasing complexity and financial knowledge at the heart of many fintech services is beyond the capability or responsibility of the consumer. Incorporating social and consumer considerations into analyses of regulatory structures can enable analyses of the regulation of fintech and move financial services regulation toward providing more socially useful and sustainable financial services. In the future, a behaviourally informed approach to the regulation of fintech may be beneficial and enhance sustainability.

How mindfulness reduces BNPL usage and how that relates to overall well-being

“…Participants were required to live in Australia and be over the age of 18. Australia was selected as the target population because of the prominence and growth of BNPL usage within its retail landscape (Johnson et al , 2021). Indeed, as of March 2021, there were 5 million active accounts according to the RBA (2021b), an almost 100% increase relative to the 2017/2018 financial year according to ASIC (2020).…”

Understanding the psychological determinants of buy-now-pay-later (BNPL) in the UK: a user perspective

“…Unsurprisingly, this raises concerns among regulatory bodies (Financial Conduct Authority (FCA), 2021), independent parties (Citizens Advice, 2022b) and academics (e.g. Fook and McNeill, 2020;Guttman-Kenney et al, 2023;Johnson et al, 2021), regarding how, for instance, to regulate such fintech products, and how to protect consumers from potential risks. To address this, the UK government (Gov UK, 2021) has announced the BNPL sector will be Financial Conduct Authority regulated.…”

“…As discussed, the existing marketing literature addressing BNPL is underdeveloped. There is negligible scholarly work that has studied BNPL spending from an economic perspective (Guttman-Kenney et al, 2023), or considered BNPL and impulse purchase in relation to apparel and overconsumption (Fook and McNeill, 2020), or financial and overall well-being (Schomburgk and Hoffmann, 2023), or examined its regulation (Johnson et al, 2021) or assessed BNPL products (Aalders, 2023). This scarcity fails to respond adequately to the rapid development and pervasiveness of BNPL in the marketplace.…”

“…Unsurprisingly numerous calls to improve understanding of consumers' interactions with such technology-based cashless payment exist (e.g. Fook and McNeill, 2020;Johnson et al, 2021). Although BNPL receives media attention (Kollewe and Makortoff, 2021), given its newness, provider proliferation, and regulatory dearth, it is essential to develop an enhanced understanding of how consumers engage with BNPL to manage their personal finances, and, hence, its role in the broader consumption landscape.…”

“…Unsurprisingly, numerous calls to improve understanding of consumers’ interactions with such technology-based cashless payment exist (e.g. Fook and McNeill, 2020; Johnson et al. , 2021).…”