Regulation beneficial for lenders and consumers, says company
Non-bank lender MoneyMe has voiced its support for a Treasury options paper proposing the introduction of consumer credit regulation in the buy now pay later space.
MoneyMe CEO and managing director Clayton Howes (pictured above) said the current omission of BNPL products in the credit reporting regime has created a “blind spot” for lenders, preventing them from gaining a full understanding of a person’s indebtedness and their ability to meet repayments.
“Accurate and extensive credit reporting allows lenders to be more accurate in our credit decisioning and, in turn, helps to protect consumers,” he said.
Howes also viewed the move toward BNPL regulation as a way “level the playing field in the industry,” noting how the BNPL sector has had a competitive advantage over other credit products.
The advantage stems from the ease by which consumers can access BNPL products, said Howes, given how BNPL does not have the same onboarding requirements as other credit products in the market.
“With this advantage no longer in play, it would also make it less attractive for merchants to offer it at the point of sale, as credit card merchant fees are often a cheaper option,” he added.
According to the Reserve Bank, the value of BNPL transactions increased by about 37% in 2021/22 to $16 billion, while the number of active Australian BNPL customer accounts also increased, from 5 million to around 7 million accounts over the year to June.
Howes told The Australian that MoneyMe backed the third option suggested by Treasury, which would require BNPL players to hold a licence and conduct lending checks in the same way that other lenders do.
“[Regulation] has got to create a fair approach for lenders and customers and for me, being fair we need to have the reporting standard so that we don’t have blind spots,” Howes said.
MoneyMe was involved in industry roundtables and Treasury consultation on BNPL regulation, but did not make a submission to the review.
Meantime, MoneyMe recently launched a new credit score product that saw over 37,000 users during its beta trial run.
This new product, available through the MoneyMe app, leverages credit file data from credit reporting agency Experian to allow users to check their credit score for free and see what’s in their credit file and how it’s impacting their score.
According to MoneyMe, users can also how their score is changing over time and learn more about their approval chances on the MoneyMe’s credit products.
A survey sent to the non-bank lender’s beta product customers revealed that 94% found it helpful to know their credit score and understand how to improve it, while 93% said they checked their score “at least every few months”.
“We are pleased to now offer a free credit score service to customers to help them get a better understanding of what impacts their credit score, and ultimately their ability to access credit in the future,” Howes said of the launch, adding that he hoped to see the growing number of BNPL users gain a better view of their current financial position.
The bulk of people holding Australia’s 7 million active BNPL accounts are aged between 18 and 34, making an average 16.6 BNPL transactions in a year, according to The Economic Impact of Buy Now Pay Later in Australia report, released on June 2022 by the Australian Finance Industry Association, RFIGlobal and BIS Oxford Economics.
“The majority of BNPL users fall in an age group that is only now building up their credit profile, or who might be considering taking out a loan on a car or even entering the property market for the first time,” Howes said. “We want this group to be in the best possible financial position when they apply for these loans.”
Most of MoneyMe’s new credit score product users are also part of the same age group, with 53% the userbase between 18 and 30 years old.
