Buy now, pay later, or BNPL, has taken the fintech industry by storm. Apps like Klarna and Afterpay are now among the most used fintech apps in the United States. BNPL brings the convenience of credit cards to more people and has a much lower barrier to entry. As a result, buyers are using BNPL apps and cards more than ever.
The U.S. Consumer Financial Protection Bureau (CFPB) has taken note of these developments and aims to curb the reckless growth of these platforms. According to CFPB Director Rohit Chopra, BNPL lenders must follow the same guidelines that apply to credit card lenders. At present, it’s much easier to sign up for a BNPL service compared to getting a credit card.
In December 2021, the CFPB stated for the first time that it was looking into the activities of the BNPL sector. After more than six months, the CFPB has stirred the conversation again. At a press event, Chopra said that BNPL companies are “harvesting and leveraging data” in an unprecedented way. By having direct access to our buying habits, these platforms can influence us in different ways.
BNPL took off during and after the pandemic. In 2021, 73% of applicants were approved for BNPL, which is an all-time high figure.
Compared to traditional loan methods, BNPL companies make it much easier for anyone to take a line of credit. There is very little supervision and regulation in the BNPL space at the moment. Going forward, the CFPB intends to change this and introduce stricter rules.