Tougher BNPL rules for the UK (eventually)
Issue 346 | 21 June 2022
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Tougher BNPL rules for the UK (eventually)
Buy now, pay later lenders in the UK will be forced to carry out affordability checks and refrain from misleading advertising and promotions under new rules proposed by the UK government.
Under the long-awaited plans, lenders will be required to carry out affordability checks, ensuring loans are affordable for consumers, and will amend financial promotion rules to ensure BNPL advertisements are "fair, clear, and not misleading".
Lenders offering the product will need to be approved by the Financial Conduct Authority (FCA), and borrowers will also be able to take a complaint to the Financial Ombudsman Service (FOS).
Economic secretary to the Treasury, John Glen says: “By holding buy now, pay later to the high standards we expect of other loans and forms of credit, we are protecting consumers and fostering the safe growth of this innovative market in the UK.”
The government will publish a consultation on draft legislation toward the end of this year, with the aim of laying secondary legislation by mid-2023, after which the FCA will consult on its rules for the sector.
The long timeline has led to criticism by consumer champions who fear that millions of people in the UK have been saddled with unaffordable debt by taking advantage of easy-to-access BNPL lending with little understanding of the repercussions around failed repayments and credit scoring.
Buy now, pay later is often insidiously marketed as a simple payment option, or worse, a lifestyle choice. It’s not. It’s a debt, with all the dangers of debts. It perverts purchasing decision-making, leaving many in a continuous loop of owe-owe-owe. Firms make money from it because people transact more via BNPL than they would otherwise.
Dame Clare Moriarty, chief executive of Citizens Advice, is equally unimpressed:
Every day spent waiting for regulation is yet another day that shoppers are left unprotected and ill informed. We’ve seen a shopper threatened with debt collectors after splitting the payment of a t-shirt and, more recently, a worrying two in five BNPL customers borrowing money to make repayments.
How bill payments have transformed since the pandemic
Behaviours and habits are the hardest things to change
Something weird happened when the world went home and started living a surreal existence, spending their work day and personal time occupying the same room. Unsurprisingly, more people started shopping online. They spent less time commuting, instead, they found themselves spending more quality time with their computers and phones.
When it comes to bill payments, more people got into the habit of making payments digitally. Cash became a thing of the past. People were increasingly required to pay at the tills and on websites using digital means. And, as patterns of behaviour changed, these happenstance arrangements started to become habits and social norms.
The pandemic caused new habits to be hard-coded into social behaviours, and bill payments was no exception.
One of the ways to embrace the changes happening in the bill payments industry, quite simply, is to adopt Request to Pay in your finance, banking and/or bill payment app.
Request to Pay is a protocol and standard for enabling smart digital bill payments from mobile devices. Essentially, it’s an instructional set of interoperability and messaging rules that allow participants in the UK banking sector to create secure communications between bill senders and receivers via their banking apps.
This means that bill payers are able to manage all their bills at a glance on the app and engage with suppliers directly. This presents a much more appealing option over having to contend with bills coming in different formats, which are often not digital.
In short, Request to Pay largely answers pressures on banks and financial services to embrace audience behavioural changes, turning the business challenge of providing digital bill payment solutions into a competitive opportunity.
Peter Cornforth, Commercial Director for Answer Pay, argues that the bigger opportunity for banks and services providers is to expand horizons from open banking to open finance. He says
“Open Banking has been a huge success with over 5M people having tried the service. Open Finance is far broader and will include the opening up of APIs from other industry sectors e.g. Energy. We think Request to Pay provides an exciting opportunity for banks and payment providers to leverage these new APIs in creating better bill payment experiences.”
Confirmation of Payee for Organisations
We’ve covered Confirmation of Payee (CoP) extensively in Payments:Unpacked but often we’ve focussed on the use of CoP across PSP’s. As the service gains greater coverage it is, perhaps, time for organisations to think about the benefits of using CoP to ensure that payments are made to and collected from the intended account.
Also, with the Payment Systems Regulator consulting on extending CoP coverage to include a wider range of PSPs now is a good time for building societies to consider adopting CoP as a tool to reduce impersonation and APP fraud and giving their members a safer more seamless user experience when depositing funds into their accounts (including the use of a ‘roll number’ and SRD validator).
SurePay's Confirmation of Payee (CoP) service is designed to help ensure organisations make payments to, and collect monies from, the intended account. CoP is also a proven solution in the fight against fraud. It is used by financial institutions and organisations throughout the UK and The Netherlands, giving them added confidence to knowing who they are doing business with.
Let’s talk about Confirmation of Payee!
Interested to hear more about how SurePay CoP can benefit your organisation?
Earlier this week I was asked about matching rates from CoP checking - SurePay report the following rates from the 320 million checks they have already performed in the UK:
PSR instigates two market reviews into Visa and Mastercard fees
The UK's Payment Systems Regulator is to undertake two market reviews into Visa and Mastercard scheme fees and cross-border interchange charges.
The PSR in April raised red flags about the "high card fees" that merchants pay to Visa and Mastercard, noting that they have risen "significantly" in recent years. In launching the review the watchdog says it wants to understand whether the markets in connection with scheme and processing fees are working well.
Cross-border interchange fees are also under investigation, with costs for card transactions having increased five-fold since the UK left the EU. The PSR says it wants to understand the "rationale" behind these increases.
Why add Open Banking payments to your checkout?
Vyne have published a guide highlights the age-old problems with card payments such as high costs and security which are resolved when switching to an Open Banking based payment solution.
Grab your copy: https://lnkd.in/e4csbkcC
Stripe unveils global infrastructure for bank transfers
Stripe is making its bank transfer offering available to businesses in the UK, EU and Mexico.
Launched in Japan earlier this year, the Stripe infrastructure promises to take the friction out of bank transfers, saving businesses hundreds of hours on confirming transfers, reconciliation and accounting, and refunds.
Stripe offers automated reconciliation, providing a virtual bank account number (VBAN) for each customer, so that incoming transfers automatically map to the correct one. A reconciliation layer allows businesses to immediately see if a customer has paid too much or too little — and can resolve overpayments through the dashboard and API.
For the week ending 19 June 2022 the volume of ATM transactions:
decreased by 26% when compared to the final week before the first COVID lockdown.
increased by 0% when compared to the previous week in 2022.
increased by 2% when compared to the equivalent week in 2021.
increased by 13% when compared to the equivalent week in 2020.
Covering Request to Pay, Confirmation of Payee, card payments, Direct Debit, payments and A2A payments Payments:Unpacked is pleased to work with the following partners:
Request to Pay: Join the secure payment revolution with Answer Pay.
Confirmation of Payee: SurePay’s Confirmation of Payee (CoP) service is an innovative, real-time name checking solution that gives UK payers greater assurance that their payments are going to the intended recipient.
Card Payments: Card Industry Professionals supporting Businesses to Accept Payments In-Store, Online or Over The Phone!
Payment Solutions: Seamless, secure & affordable payment solutions that enable organisations of all sizes to accelerate growth & innovation from Access PaySuite.
Payments: ACI Worldwide - New Payments Architecture, ways ACI can help you today, to support your migration to NPA.
If you’d like to join support Payments:Unpacked in helping unpack the UK’s payments landscape contact: email@example.com
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