Insights

RBA gives BNPL another blessing

The Reserve Bank of Australia (RBA) has just given the buy now, pay later (BNPL) sector another green light and poured water on regulation
The post RBA gives BNPL another blessing appeared first on The Motley Fool Australia. –

RBA influence on asx shares represented by yellow wall with reserve bank of australia sign on it

From the moment the buy now, pay later (BNPL) concept was born, it has faced criticism and the threat of possible regulation. The sector that BNPL aims to supplement (or perhaps replace), credit provision, is one of the most regulated industries in the country.

Under current laws, not every Tom, Jane or Harry is allowed to offer credit cards or personal loans to anyone they please. You need a credit license, regulatory approval and the ability to satisfy a raft of other compliance measures.

But the same cannot be said of BNPL products. The companies that offer BNPL services, such as Afterpay Ltd (ASX: APT), have long argued they shouldn’t be subject to the same laws and regulations as traditional credit providers. That’s namely because BNPL products usually don’t charge interest. And it is interest (which has a nasty habit of compounding over time) that normally gets debtors into strife. Or so the argument goes.

Until now, BNPL providers have managed to keep this status quo going, despite those such as Commonwealth Bank of Australia (ASX: CBA) CEO Matt Comyn telling investors last month he believes BNPL regulation to be ‘inevitable’.

However, reporting from the Australian Financial Review (AFR) this morning has put another feather in the caps of Afterpay and the wider BNPL sector.

RBA gives BNPL another green light

The AFR reports that Reserve Bank of Australia (RBA) governor Dr. Philip Lowe “has given the strongest indication yet” that buy now, pay later providers will be able to continue insisting stores and merchants do not pass their costs on to customers. For now, at least.

According to the report, Dr Lowe gave a speech at an AusPayNet event. He laid out the RBA’s position on the “no surcharge” restrictions: “The board’s preliminary view is that the BNPL operators in Australia have not yet reached the point where it is clear that the costs arising from the no-surcharge rule outweigh the potential benefits in terms of innovation”.

Dr. Lowe went on to state that, “even the largest BNPL providers still account for a small proportion of total consumer payments in Australia, notwithstanding their rapid growth”. He noted only around 1% of the total payments volume in the country go through BNPL channels.

Lowe also points out that “the increasing array of BNPL providers is resulting in competitive pressure that could put downward pressure on merchant costs”.

As such, Dr. Lowe says the RBA will only step-up regulation in the buy now, pay later sector when “it is clear that doing so is in the public interest”. And right now, “the board is unlikely to conclude that the BNPL operators should be required to remove their no-surcharge rules”.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of June 30th

More reading

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post RBA gives BNPL another blessing appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!