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CommBank says its foray into buy now, pay later would encourage better regulation

By on September 24, 2021 0

One of the reasons the Commonwealth Bank of Australia (CBA) says it has decided to enter the buy now, pay later (BNPL) market is because it believes it would prompt policymakers to step up the current regulation of the industry. emerging.

The bank recently launched StepPay, a BNPL offer linked to its customers’ bank account, which can be used anywhere debit and credit payments are accepted for transactions, and there are no ongoing fees. There are also no additional fees for businesses other than the standard merchant fees.

“One of the reasons we entered space, because we actually thought the fastest way to introduce regulation in this area would be for us to offer it. That hasn’t been done today. ‘hui, “said Matt Comyn, CEO of ABC. said Thursday at the Standing Committee on Economics.

BNPL allows individuals to purchase goods without immediate payment. Instead, users can pay for the purchase of a good later or in installments.

When signing up for BNPL services, such as Afterpay and Zip Co, customers aren’t required to go through credit checks – they can just sign up and spend.

This was one of the questions raised by ANZ boss Shayne Elliot during the parliamentary review of the Big Four banks and other financial institutions. He pointed out that, unlike other financial services, the industry is not bound by legal obligations despite similarities in product offerings.

“I always said there was a place for [BNPL]. Obviously that doesn’t mean we have to do it… and if used in the right way, it’s a perfectly decent product, ”he said.

“Our concern is more about the possibility that this product may be used inappropriately and largely without regulation.

“I think it’s ironic… Afterpay, which is now owned by Square, launched what they call retro buy now, pay later. So something you’ve already bought, you’ve already paid for, you can change. reviews, and they’ll give you credit for it.

“But apparently, under our regulatory framework, it’s not credit, and therefore, they’re not subject to the same rules as everyone else when it comes to responsible lending.

“If I gave you an AU $ 200 overdraft without doing a full credit check… I would have a violation report with ASIC. I find this to be exactly the kind of regulatory arbitrage that I don’t think is useful. on the market.”

What Elliot wants to see are “regulatory frameworks that continue to support a fair and questionable banking and financial services market for the benefit of the community.”

The Reserve Bank of Australia (RBA), which has looked into this space, previously said BNPL’s concern is not with consumers, but rather with the payment system.

“The issue we’re looking at is really rules-based at no extra cost, which is a matter of competition and a level playing field. So that’s the issue we’re focusing on,” said the deputy governor of the system. RBA financier Michele Bullock.

In March, the Australian Finance Industry Association (AFIA) introduced a code of conduct, which it touted as a “proactive approach to increasing consumer protection” that goes “beyond current regulatory obligations for products or services. BNPL services “.

The code focuses on the client, in particular by taking into consideration any vulnerabilities that it may have; the promise to be “fair, honest and ethical” in a company’s practices, which includes a commitment to the Australian government’s ethical principles of artificial intelligence; and ensure that a product is suitable before registering a customer.

Existing customers are also aware of the code’s instructions and the ongoing review of the suitability of a product or service when it is undertaken.

BNPL suppliers will be members of the Australian Financial Complaints Authority and subject to its rules. By complying with the code, businesses and their agents will also comply with the debt collection guidelines of the Australian Competition and Consumer Commission and ASIC.

Afterpay, Brighte, Humm Group, Klarna, Latitude, Openpay, Payright and Zip Co are currently accredited under the code.

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