Some resources on behavioural aspects of BNPL

Disclaimer: It hopefully goes without saying but will say it anyway that anything I say on live policy issues reflects a personal view and not a view of any institution I am involved with. 

I am using this post to keep track on some interesting papers on resources on  behavioural aspects of buy-now-pay-later (BNPL) products. Many students in my classes in recent years have raised this as a topic and it is more generally an obviously important area for financial regulation. My own focus has been on the UK and Ireland but will include anything valuable I can find here. The links below focus relatively narrowly on the type of products emerging that enable costs of products at the counter to be defrayed over time. Though there are clearly overlapping issues with an array of emerging credit products as well as novel digital financial products more generally. I am also going to focus on papers and reports directly addressing BNPL though there are clearly many relevant cognate and background literatures in areas such as intertemporal choice that would be relevant. Hopefully below will stimulate some suggestions online and be a starting point for people developing a knowledge base in their regulatory environment on these products. 

Reports 

Lunn, P., McGowan, F., Howard, N. (2018).  Do some financial product features negatively

affect consumer decisions? A review of evidence. ESRI, Dublin. 

2021 Woolard review for FCA on unsecured credit market

The regulation of unregulated buy-now pay-later: BNPL products which are currently exempt from regulation should be brought within the regulatory perimeter as a matter of urgency. The use of BNPL products nearly quadrupled in 2020 and is now at £2.7 billion, with 5 million people using these products since the beginning of the coronavirus pandemic. The emergence and expansion of unregulated BNPL products gives consumers a significant alternative to more expensive credit, but this also comes with significant potential for consumer harm. For example, more than one in ten customers of a major bank using BNPL were already in arrears. Regulation would protect people who use BNPL products and make the market sustainable.

Notes on publication of 2019 regulations by FCA on BNPL products in the UK

The proposals confirmed today mean:
Firms cannot charge backdated interest on amounts of money that have been repaid by the consumer during the BNPL offer period.
Firms have to provide better information to consumers about BNPL offers. The information should be more balanced and appropriately reflect the risks as well as the benefits of the product.
Firms must give prompts to consumers, to remind them when the offer period is about to end, so that consumers are more likely to repay the credit before they incur interest.

2021 HM Treasury Consultation on regulation of BNPL products  

2021 Which? report on BNPL products and potential for consumer harm.  

 Details of opening of 2021 US Consumer Financial Protection Bureau inquiry into BNPL products.

Today the Consumer Financial Protection Bureau (CFPB) issued a series of orders to five companies offering “buy now, pay later” (BNPL) credit. The orders to collect information on the risks and benefits of these fast-growing loans went to Affirm, Afterpay, Klarna, PayPal, and Zip. The CFPB is concerned about accumulating debt, regulatory arbitrage, and data harvesting in a consumer credit market already quickly changing with technology.

2020 ASIC report on BNPL products. In general one of a number of useful pieces written in the Australian context. 

Some relevant newspaper articles/opeds: 

Irish Times report on launch of klarna in Irish market. 

Informative article by Dr. Olive McCarthy on Irish and EU regulatory context for BNPL products.