Whilst many have seen the integration of the Buy-Now-Pay-Later (BNPL) model as a potential saviour for a travel industry looking to get back on its feet, the changing regulatory framework around this presents challenges in 2022 for anyone looking at trying to offer BNPL to their customers.

The meteoric growth of BNPL across the retail sector has been impossible to ignore and has naturally led to many within the travel industry looking at ways to jump on the BNPL bandwagon.

To date, BNPL has remained outside the notoriously difficult regulatory regime associated with consumer lending in the UK (the Consumer Credit Act 1974) and has meant BNPL has been easy to implement and provides frictionless interaction with customers. Providers or merchants are not required to be authorised by the FCA and the lack of regulation around BNPL allows funds to be accessed at speed (without the need for affordability checks or overly legalistic agreements between the lender and the consumer).

This is all set to change however, with HM Treasury launching its much-anticipated consultation on regulating the BNPL sector in November 2021, with final rules expected from the FCA in 2022.

Whilst the details of the regime and exactly what will be captured are still to be finalised, we do know a there will be a new regulatory framework for BNPL which will lead to wholesale changes for those involved.

Most importantly, BNPL lenders (i.e. those financing the transactions) will need to be authorised by the FCA under the new regime. Access to funds will be slowed with lenders required to carry out creditworthiness checks and provide customer with certain pre-contractual information.

Whilst merchants offering BNPL loans from third parties will helpfully remain outside the regulatory perimeter, they will need to be aware that they could be caught by financial promotions rules, with strict requirements around how these loans are marketed and displayed. Relevant due diligence will also need to be undertaken so that companies are satisfied that any BNPL providers they use are meeting the required requirements (and are at the very least authorised to provide BNPL loans).

Key takeaway point

All of this means that what once was a quick and easy route to market, will no longer be the case. Increased regulation inevitably results in increased cost as well as an increased layer of complexity for anyone looking to use BNPL to increase sales.


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