A story of Big Tech and great financial lenders moving faster than regulators and governments is not very new, but two news stories this week marked the contrast in the “buy now, pay later” (BNPL) market. , where financial products, critically, remain unregulated in most cases.
First, Apple said its new iPhones in the U.S. will offer a BNPL feature to Apple Pay starting in the fall, giving users the option to make payments through an interest-free four-month loan. The innovation could be brought to the UK a few months later, providing tougher competition for people like Klarna.
Apple’s entry, it can be predicted with confidence, will further fuel BNPL’s growth. However, it is estimated that the annual volume of loans will have more than doubled in 2021 in the UK from £ 2.7 billion calculated by the Financial Conduct Authority (FCA) by 2020.
Second, Citizens Advice showed how BNPL loans are integrating into the regulated credit card market. According to the charity, 42% of recent BNPL buyers in the UK rely on credit cards or other forms of lending to pay off what they owe.
His description of buyers “piling up loans on top of loans” seems broadly accurate. At the very least, an image of consumers juggling and shuffling debts can be seen, a pattern of behavior that should concern regulators with their duty to look after the interests of consumers.
And, to be fair to the FCA, he’s worried. After a review in February 2021, he said there was “a strong and urgent case to regulate the BNPL business.” Nor should there be much debate about how to regulate.
The general principles should only roughly reflect those of other places for unsecured credit: affordability checks; clear and honest marketing; free debt counseling for troubled borrowers; the right to have recourse to an ombudsman.
The government also supported the regulation in October and the Treasury began to consult. Five months after the close of his consultation, however, we are still awaiting the conclusions and an action plan. Since the FCA cannot make its own consultation until it has Treasury approval, the first to see a nailed regulatory framework is likely to be 2023.
The pace is surprisingly slow. The interest-free BNPL product itself clearly has benefits for borrowers who pay on time. The danger lies in the spread of cheap clothing purchases to utility bills, as some vendors are targeting, and the large number of contracts a consumer can accumulate. We could soon be looking at a £ 10bn loan market, at which point BNPL will cease to be a minority sport and will have entered the mainstream.
Treasury must hurry. It shouldn’t take two years or more to move from a “strong and urgent case” for regulation to implementation. Consumer protection should already exist.
Getting points in the game of guilt is not good for Wizz Air
Wizz Air’s problems reveal an investment of fortunes for the airlines. Photo: Andrew Boyers / Reuters
What a difference nine months make. Last September, the airline industry felt vaguely happy for life for the first time since the advent of Covid. Reserves began to skyrocket and stock prices rose. Wizz Air, with a stock market valuation of £ 5bn, was even encouraged to take a blatant (and quickly rejected) approach to acquiring easyJet.
And now? Well, the price of Wizz shares has been halved (and easyJet is down by a third) and the cautious optimism mood has been replaced by a fog of confusion. Wizz’s full-year report told the story on Wednesday: the retrospective loss of 642 million euros (£ 550 million) in the 12 months to March was not the main concern; rather it was a long list of complaints about how customers ’return is being wasted amid“ supply chain problems, ”as founder and CEO József Váradi said.
His complaints covered staff shortages in air traffic control, ground handling and border control. Airlines are probably not sweet innocently when it comes to hiring, but airports seem to have been spectacularly slow in re-hiring staff they fired by the thousands during the pandemic. The infrastructure was not available to support a return to mass flight that had been planned for months.
However, scoring a few points in the guilt game doesn’t do much for Wizz. At this stage of the exercise, you are usually in a position to estimate the result. This time it was limited to predicting more losses in the April-June quarter despite “strong consumer demand for the summer.”
Shares lost 10% and it’s easy to see why – in the face of high hopes for last fall, the financial recovery of airlines seems to be about a year behind schedule.