Analyzing the Impacts of Financial Services Regulation to Make the Case That Buy-Now-Pay-Later Regulation Is Failing

Fee-based Buy-Now-Pay-Later services (BNPL) are becoming widely adopted in many developed countries, including Australia. Across a variety of regulatory approaches there appears to be relatively minimal regulatory coverage of fee-based BNPL. This review applies a results-oriented, behaviourally informed market failure approach to assess the regulatory outcomes of fee-based BNPL. The review makes the case that the impacts of the regulation of fee-based BNPL in Australia demonstrate multiple forms of regulatory failure. The regulatory failure is particularly due to regulatory capture at a broad level and especially in terms of a lack of consumer protections. Consumers may particularly need consideration and protection because understanding the increasing complexity and financial knowledge at the heart of many fintech services is beyond the capability or responsibility of the consumer. Incorporating social and consumer considerations into analyses of regulatory structures can enable analyses of the regulation of fintech and move financial services regulation toward providing more socially useful and sustainable financial services. In the future, a behaviourally informed approach to the regulation of fintech may be beneficial and enhance sustainability.