The news: New Zealand proposed buy now, pay later (BNPL) regulation like requiring providers to carry out affordability checks for purchases above NZ$600 ($424), per a press release. Loans under this threshold will still be subject to credit reporting.
Government officials will collect feedback for the proposed rules and roll out final regulations next year.
Key context: BNPL spending in New Zealand increased from NZ$755 million ($534 million) in 2020 to NZ$1.7 billion ($1.2 billion) in 2021, according to government statistics. Consumers are increasingly using BNPL for more purchases and for higher-dollar transactions, per a New Zealand Post report.
But BNPL providers are insufficiently covered by the current regulatory framework, according to government findings. Because these firms often don’t charge interest and have limited fees, they’re not required to comply with the Credit Contracts and Consumer Finance Act, which outlines consumer protections and standards for borrowing and loans.
What this means: More global governments are cracking down on BNPL providers as consumer adoption surges. Fifteen percent of adults worldwide have made a purchase using BNPL, per YouGov. And between 2021 and 2025, global BNPL use for ecommerce purchases is expected to grow 66.7%, according to FIS.
The bigger picture: Growing concerns of a global economic downturn may compel regulators to enact BNPL regulation sooner rather than later. Financial strain may cause some consumers to lean more heavily on BNPL, and without set standards like information sharing in place, they may find themselves inadvertently falling into unsustainable debt.
This article originally appeared in Insider Intelligence's Payments Innovation Briefing—a daily recap of top stories reshaping the payments industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.