BNPL providers should prepare now for potential regulatory changes affecting credit reporting, customer creditworthiness, late fees, and more.

These deals could help both firms sustain business as recession fears, higher competition, and looming BNPL regulation threaten growth.

BNPL attracts users who are higher-risk and younger than the general credit-seeking population, a TransUnion study found.

Fintechs enjoy a privileged position relative to banks, as they’re saddled with significantly less regulation. But as neobanks, BNPL providers, crypto companies, credit monitoring firms, and brokerages take off, more customers are getting burned, spurring agencies such as the Consumer Financial Protection Bureau into action.

Specialized BNPL providers focusing on sectors like air travel and auto repair are already popping up, foretelling more partnerships in these and other segments in 2022. Looming Regulation Could Slow Growth. Regulators are concerned that BNPL providers are driving up users’ debt by offering credit to those who can’t get it elsewhere.

The gap in regulation has hurt both borrowers and traditional banks. Updated regulations are needed to level the competitive field and to address the evolving banking landscape.

The acquisition could give Zip a path into long-term financing and a user base boost as competition mounts and regulation looms.

Klarna is the most popular buy now, pay later (BNPL) service in the US, with 34.8 million users ages 14 and older. Afterpay takes the No. 2 spot with 20.0 million, and Affirm comes in third with 14.0 million.

Fiserv will let merchant clients using Carat offer Affirm to their customers as demand for BNPL intensifies.

Klarna and other BNPL providers have struggled with profitability despite rapid user growth. BNPL regulation is starting to take shape across many markets—which could strain growth for providers like Klarna: Just this week, the UK government outlined plans to regulate BNPL, which included requiring providers to gain approval from the Financial Conduct Authority and carry out eligibility checks.

Walgreens and other major brands joined Mastercard Installments, further sharpening Mastercard’s edge in the BNPL space.

Q&A: Sezzle co-founder & president talks BNPL competition, regulation, and diversification.

These offerings extend Klarna’s reach and could help it contend with tighter competition and impending regulation in the BNPL space.

Our take on what BNPL, cryptos, super apps, and global digital expansion will look like in 2022—and what that means for key stakeholders.

The bigger picture: Regulators in the UK and Australia have also sharpened their focus on BNPL providers in light of data suggesting the risks involved with their offerings. Their moves could foreshadow what BNPL regulation might look like in the US.

These are the types of financial risks that are helping push regulation in the BNPL space: Australia, for instance, recently drafted more robust BNPL regulations, and stricter rules in the US could follow. Related content: Check out our latest BNPL coverage to see what providers are doing to woo customers. Afterpay hopes to pull consumers away from credit cards this holiday season with Rakuten tie-up.

Klarna implemented a number of changes to make its UK business more transparent and limit consumer BNPL risks.

Growth will come from Gen Z’s interest in buy now, pay later (BNPL) and incumbents’ push to outspend and outinnovate competitors.

Activity in the field has continued, including US-based fintech Square’s pending acquisition of buy now, pay later (BNPL) provider Afterpay, which in turn is entering neobanking with a savings app.

Crucially, the EU will likely mandate stronger consumer protections for those using BNPL services. UK. Regulation Promises to Improve Consumer Trust in BNPL Services in the UK. In February 2021, the UK government announced that its Financial Conduct Authority would begin regulating the BNPL sector.

The Australian Prudential Regulation Authority (APRA) now requires entrants to offer income-producing products, like loans, and to have an exit plan. This will scare off some neobanks—but those that have launched, or are about to, may benefit.

ACI PayAfter integrates more than 70 BNPL options into a single solution for merchants.