The study credited Australia with leading the way in BNPL regulation,after the government earlier this year unveiled its plan to subject the sector toresponsible lending obligations.
But the BIS raised concerns about global risks,saying data on BNPL around the world suggested users were generally younger and tech savvy,but often less financially literate than older generations. This raised the risk that some BNPL users engaging in “imprudent” spending on the platforms,and some customers taking on too much BNPL debt.
BNPL services such as Afterpay and Zip allow customers to borrow money via digital instalment loans,but because no interest is charged,the sector has escaped the regulation that applies to credit cards.
The sector has experienced strong growth around the world,with the BIS report estimating BNPL transactions hae increased by more than sixfold since 2019,to more than US$300 billion ($456 billion) in 2023.
‘The rapid ascent of BNPL could be of concern to public authorities for two reasons:consumer protection issues and the accumulation of credit risk.’
BIS report
The BIS report said even though BNPL payment costs for merchants were consistently higher than those for credit cards or online banking,merchants used BNPL to broaden their customer base,including accessing “customers who lack immediate financial means.”
It said global data suggested BNPL customers were generally riskier borrowers,and the industry warranted close attention.