LONDON : Reduced consumer spending, rising interest rates and trickier credit conditions spell trouble for Buy Now Pay Later lenders, raising the prospect of consolidation in the sector.
The model proved popular among young consumers during the COVID-19 pandemic as e-commerce volumes soared, with Buy Now Pay Later transactions accounting for $2 in every $100 spent in e-commerce last year, according to GlobalData. "Right now there's more caution and less interest because of the financial risks that could become apparent here if we are in an economic slowdown or a potential recession," said Bryan Keane, senior payments analyst at Deutsche Bank.
For smaller players, many of them fledgling start-ups, accessing funding to lend to shoppers will become more difficult. Britain's finance ministry has launched a consultation on how BNPL firms should be regulated. Australia's financial services minister said on Tuesday https://www.theguardian.com/business/2022/jun/08/embattled-buy-now-pay-later-sector-to-be-regulated-under-credit-card-laws the government would push to regulate BNPL lenders under credit laws.