Regulation Around the World

Buy now pay later

Publication | December 2022
Regulation around the world
Buy now pay later

Buy now pay later

Buy now pay later (BNPL) is a sort of short term financing that allows consumers to make purchases and pay
for them at a later date. There are a different models for BNPL products. Generally these are categorised into
split pay, pay later, long term financing at 0% annual percentage rate, longer-term financing with subsidized
interest or fee. Distribution channels for BNPL include merchant checkout, merchant platforms, multi-lender
networks, bank credit cards and white label providers (customised store credit cards). The arrangements for
BNPL have become increasingly popular with both merchants and customers. Such widespread adoption has
led to increasing regulatory scrutiny although in some jurisdictions self-regulation through industry codes have
been the preferred route. Regulators are concerned that consumers may not fully understand the implications
of entering into a BNPL scheme.

Global 05 European Union 11 Luxembourg 14 Singapore 20

United Kingdom 06 Netherlands 12 Italy 14 Shanghai 21
United States 08 France 13 Australia 16 South Africa 22
Canada 10 Germany 13 Hong Kong 18 United Arab Emirates 23

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Key risks include:

Global Netherlands
Many new players are entering the payments market with The Consumer Credit Directive has been implemented in
Bigtech players leveraging in particular their existing digital the Netherlands and BNPL services generally fall outside
platforms. BIS has issued an Occasional Paper on BigTech the scope of regulation. The Netherlands supports the new
regulation. Consumer Credit Directive.

United Kingdom France

The UK Government is proposing to extend the scope BNPL schemes are excluded from the consumer credit
of regulation to capture those BNPL firms that are not regime when specific conditions are met. However, French
currently regulated. The FCA has also warned BNPL firms banking rules still apply and BNPL is considered to be
about misleading adverts. credit, therefore bringing it within scope of the French
banking monopoly rules.
United States
Germany
The CFPB has recently been looking at BNPL and has
issued a report which makes it clear that the agency plans BNPL services and their offer have to be carefully construed
to increase the regulation of the BNPL industry. The FTC as they may trigger licence requirements. It has to be
has also issued a clear reminder that basic consumer ensured that use is made of existing exemptions.
protection ground rules of the FTC Act apply.
Luxembourg
Canada
Like other Member States Luxembourg has implemented
While BNPL lenders usually do not choose to establish the Consumer Credit Directive via a Consumer Code which
themselves as a federally regulated financial institution they provides for an exemption from consumer credit regulation
do have to carry on business in accordance with provincial where the total amount of the credit is less than EUR 200 or
regulatory requirements. Having issued a pilot study on more than EUR 75,000. Depending on the business model,
BNPL services in Canada the FCAC is currently monitoring consideration may also have to be given as to whether a
the evolution of the BNPL market in Canada. financial services, lending licence or payment services
licence is required.
Europe
Italy
BNPL services generally fall outside the scope of the
Consumer Credit Directive. The European Commission has The Bank of Italy has issued a communication on BNPL
issued a proposal for a revised Consumer Credit Directive schemes to draw the attention of consumers on the
which is currently being finalised. The draft Directive as prevalent forms of BNPL in the Italian market.
proposed by the Commission brings within scope BNPL
schemes but some BNPL schemes may fall within an
“optional partial derogation” proposed by the Council.

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Australia Shanghai
BNPL products in Australia are not currently regulated Whilst China does not directly regulate BNPL products it
under consumer credit laws and instead many providers has started to strictly regulate digital finance platforms,
of BNPL products adhere to an industry code of conduct. some of which provide interest-free short term financing
However, the Australian government has recently issued a similar to the BNPL model.
consultation/options paper intended to close any regulatory
‘gaps’ in the market. In the meantime BNPL products also South Africa
fall within scope of the Australian Securities & Investments From a regulatory perspective, BNPL models fall outside
Commission design and distribution obligations. the ambit of the National Credit Act, 2005 – legislation
designed to protect the consumer in the credit market.
Hong Kong
The HKMA has published a webpage stating that BNPL United Arab Emirates (DIFC)
products are not much different from unsecured personal Some BNPL operators are carrying on business in the UAE
loans and as such consumers need to be mindful of the through a system of contracts where their DIFC entity acts
risks. The HKMA has also issued a circular to authorised as a non-regulated entity that only provides the technology
institutions on BNPL products. aspect for a UAE ‘onshore’ entity.

Singapore
MAS is closely monitoring the BNPL sector. Currently, MAS
is of the view that effective industry self-regulation, through
an industry code, should adequately mitigate the risks in
the BNPL sector.

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Global
Globally buy now pay later (BNPL) is becoming an At present these risks are only partially addressed by the
increasingly important part of the payments market. existing regulatory framework in the sense that current
In a speech¹ published on the website of the Bank for requirements focus on the legal entities that perform
International Settlements (BIS) the payments market is regulated activities rather than on the Bigtech group as a
described as a “symbiosis between the private and public whole. The Occasional Paper puts forward the possibility of
sector”. In this way central banks provide the public with defining a new framework for addressing the specific risks
access to money and also operate their own financial that originate from the business model of Bigtechs that
market infrastructures therefore serving as the backbone perform significant financial activities (big tech financial
for the entire payments infrastructure. The private sector group or BTFG). This could take the form of a consistent set
operates mainly at the interface to the customer with of entity-based rules spanning different but related domains
commercial banks maintaining customer accounts and (governance, conduct of business, operational resilience,
managing the customer experience. The private sector financial solvency).
“drives the momentum that allows innovation to unfold”.

Many new players are entering the payments market with

Bigtech players leveraging in particular their existing digital
platforms. As a result, payments are becoming increasingly
embedded in fully digital transaction value chains. There
is a possibility that banks may in the future be sidelined
as interchangeable settlement agents. At the moment,
Bigtechs rely on cooperation with banks for the settlement
of payments although this may change particularly if
“platform money” in the form of stablecoins are used.

Recently the topic of Bigtech regulation was the subject

of a BIS Occasional Paper.² The paper noted a number of
themes arising from Bigtechs including that their business
model favours the continuous expansion of the size and
variety of financial and non-financial services that they
offer to the public and also that the direct provision of
financial services is usually conducted through regulated
legal entities. The potential risks that Bigtechs present to
financial stability originate not only from the direct provision
of financial services in combination with commercial
activities, but also from their extensive linkage with
traditional financial institutions.

1 Speech by Mr Burkhard Balz, Member of the Executive Board of the Deutsche Bundesbank, at the Payments Association (PA) EU “Payments tomorrow” –
Annual Conference 2022, Madrid, October 14, 2022.
2 BIS Occasional Paper No 20 Bigtech regulation: in search of a new framework

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United Kingdom
Introduction The RAO provides for some exemptions from regulation
so that not all forms of credit are regulated. In particular,
BNPL covers a wide range of credit agreements, generally
this includes an exemption for interest-free credit. This
used by consumers to spread the cost of purchases. The
exemption is set out in article 60F(2) of the RAO and is
February 2021 Woolard Review which looked at change and
sometimes referred to as the ‘A60F(2) exemption’. A range of
innovation in the unsecured credit market found that the
financial arrangements fall into this exemption. For example,
use of BNPL products in the UK nearly quadrupled in 2020
simply providing an invoice that permits the customer to
to £2.7bn. Following the publication of the Woolard Review
pay for goods and services beyond the due date, to a formal
the UK Government announced its intention to regulate
agreement to pay for items in instalments.
BNPL. The UK Government issued a consultation on BNPL
in October 2021 and followed up with a response document Chapter 3 of the CONC contains the requirements that
in June 2022. We discuss this further below. apply to financial promotions of credit agreements.
Currently not all BNPL products are under the financial
Current position
promotions remit. For example, merchants’ marketing and
While there are some BNPL arrangements that are advertising to customers to enter a BNPL agreement, which
regulated in the UK, others are not. is offered by an FCA authorised lender’, do not need to seek
approval of the promotion from an FCA authorised person.
Unsecured consumer credit is regulated in the UK under
the framework provided by the Consumer Credit Act 1974 The future
(CCA) and the Financial Services and Markets Act 2000
As mentioned above the UK Government issued a response
(FSMA). Broadly, a consumer credit agreement is one
document to its earlier consultation on BNPL in June 2022.
under which an individual is granted credit (defined as a
The key points from the response document included:
cash loan or other ‘financial accommodation’). The scope
of regulation, that is exactly which types of agreement • The scope of regulation should capture BNPL and other
are regulated and which are not, is set out in detail in currently exempt agreements (which it referred to as
the Financial Services and Markets Act 2000 (Regulated short-term interest-free credit (STIFC)) when they are
Activities) Order 2001 (the RAO). Firms which offer provided by third-party lenders.
regulated credit agreements must be authorised to do so
• The UK Government was minded to extend this
by the Financial Conduct Authority (FCA), and must comply
scope to also capture STIFC provided directly by
with relevant FCA rules as well as requirements in the CCA.
merchants where it is offered online or at a distance, but
The regulation of consumer credit has certain differences further stakeholder engagement is necessary to fully
when compared to the majority of other regulated financial understand the scale of the merchant-offered STIFC
services products. For example, for most regulated market.
products HM Treasury defines which activities are subject • The UK Government will allow exemptions for specific
to regulation and delegates responsibility for this regulation agreements where there is limited risk of potential
to the FCA. The FCA then develops rules. For consumer consumer detriment, and where regulation would
credit the CCA imposes statutory obligations on firms and otherwise adversely impact day-to-day business
gives protections to consumers in addition to FCA rules. activities.
HM Treasury is responsible for these statutory elements
of the regulatory regime, whilst the FCA is responsible for
making conduct rules in its consumer credit sourcebook
(CONC) under its rulemaking process.

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• All advertising and promotions of BNPL and regulated For example, on August 16, 2022, the FCA published a press
STIFC agreements will fall within the financial release warning BNPL firms about misleading adverts. The
promotions regime. This includes financial promotions FCA reminded firms that offer BNPL products that although
by merchants offering BNPL and STIFC as payment some agreements are unregulated, the financial promotions
options. Where a merchant is not authorised by the FCA of all BNPL products must comply with the financial
it will need an authorised firm to approve any financial promotion rules. Authorised firms selling unregulated or
promotions of the BNPL or STIFC product. exempt BNPL products must comply with the relevant rules
unless an exemption applies. This includes that their BNPL
• The UK Government’s approach to regulatory controls
financial promotions must be clear, fair and not misleading.
for agreements that will be brought into regulation will
tailor the application of the CCA to these products, and The warning was issued as the FCA is concerned that
the elements of lending practice most linked to potential consumers could be misled if BNPL financial promotions
consumer detriment. do not comply with the rules and has seen financial adverts
The UK Government also stated when it issued its response on websites and social media which may breach them.
document that it would issue a second consultation seeking For example, adverts emphasising the benefits of BNPL
views on draft legislation by the end of 2022. Alongside products without fair and prominent warnings of any
this, it would set out its final position on regulating STIFC. risks to customers such as: the risk of taking on debt that
It would lay secondary legislation by mid-2023, after which customers cannot afford to repay; the consequences of
the FCA would consult on its rules for the sector. missed payments; any other adverse consequences such
as the impact on the customer’s credit file; and information
At the time of writing the UK Government had not produced about when charges become payable.
its second consultation.
Although the FCA does not yet regulate BNPL products it
However, on July 20, 2022, the UK Government published has been proactively addressing concerns about potential
the Financial Services and Markets Bill. The Bill runs to harms to customers. For example, the FCA has also held
over 300 pages and seeks to deal with the revocation of a round table with BNPL providers to discuss upcoming
EU retained financial services law, the provision of new regulation (see above). Additionally, earlier this year,
regulatory powers and new provisions concerning the the FCA worked with BNPL firms to secure changes to
accountability of the UK regulators. On September 9, 2022, potentially unfair and unclear terms in BNPL contracts
the House of Commons published an Amendment Paper for using powers under the Consumer Rights Act 2015.
the Bill moving that a new clause be added that would bring
the non-interest-bearing elements of BNPL lending and The FCA has confirmed it will use criminal and regulatory
similar services under the regulatory ambit of the FCA, as enforcement powers if it sees adverts that do not comply
proposed by the UK Government. At the time of writing the with its financial promotion rules. So far this year, FCA
Bill is making its way through Parliament. action against firms that have breached its rules has led to
4,226 promotions being changed or withdrawn.
Misleading adverts
The FCA has also issued a Dear CEO letter to BNPL
Although the FCA does not yet regulate all BNPL products providers setting out its concerns. The FCA expects the
it has been proactively addressing concerns about potential boards of BNPL providers to consider the issues raised in
harms to consumers. the letter and approve the action taken in response.

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United States
Introduction CFPB activity
In the United States, the BNPL market has seen exponential The CFPB has recently been looking at BNPL.
growth that has been driven by increases in online and
On December 16, 2021, the agency issued a market
mobile app shopping during the COVID-19 pandemic.
monitoring inquiry seeking to gain insight into BNPL by
Such growth has attracted scrutiny from financial services
issuing a series of orders to five firms operating in the
regulators who have concerns regarding the lack of specific
United States that offer BNPL products. Following this
rules and potential risks to consumers.
on January 24, 2022, the CFPB invited public comment
Current regulation to help the agency “understand how people interact with
these providers, and how the providers’ business models
In the United States, BNPL providers are subject to
impact the broader e-commerce and consumer credit
some federal and state oversight and regulation. Laws
marketplaces.”
applicable to BNPL programs also vary by business model.
The Consumer Financial Protection Bureau (CFPB) has On September 15, 2022, the CFPB issued a report offering
enforcement authority over providers of credit, and it has key insights on the BNPL industry and made it clear that
authority to supervise any non-depository covered persons, the agency plans to increase the regulation of the BNPL
such as a BNPL provider, in certain circumstances. The industry, especially in those areas where there is risk of
Federal Trade Commission (FTC) shares enforcement consumer harm³ . For the purposes of the report, the CFPB
authority with the CFPB. Some states consider BNPL to be defined BNPL as the “pay-in-four” or “split pay” product:
consumer credit and require state licensing or registration, a four instalment, no interest consumer loan, typically with
as well as compliance with state consumer credit laws, a down payment of 25 percent and the remaining three
while other states do not require licensing or registration instalments due in two-week intervals. The report excluded
for BNPL products with no interest or finance charges. For other forms of short-term purchase financing, such as
example, the California Department of Financial Protection point-of-sale instalment loans and post-purchase credit
and Innovation, the state’s financial services regulator, card instalment plans.
has been a leader in the oversight of BNPL products,
concluding five enforcement actions with BNPL providers The report identified a number of risks associated with
since late 2019 that clarify the regulator’s position that BNPL products with its analysis of typical BNPL product
BNPL products are consumer loans and that the companies features “demonstrates that some market participants’
that offer them must comply with California’s state lending offerings appear to be structured to evade certain federal
rules. A potential problem therefore for BNPL providers consumer lending requirements”. For example, the CFPB
is that they may encounter inconsistent regulatory and found that:
enforcement strategies and approaches from federal and
• Most BNPL lenders do not currently provide the
state regulators.
standard cost-of-credit disclosures or periodic
statements required by the Truth in Lending /
Regulation Z.
• Most BNPL lenders surveyed were not following
Regulation Z’s credit dispute resolution provisions.

3 For further information please refer to the Norton Rose Fulbright client alert ‘All signs point to increased US regulation by Buy now, Pay Later’.

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• Some BNPL providers were making removing auto-pay The future

challenging or impossible.
In remarks that coincided with the report, CFPB Director
• BNPL product structures and business strategies may Rohit Chopra covered some of the additional steps that
contribute to consumer over extension which can CFPB staff would be taking in respect of BNPL products.
manifest itself through loan stacking and sustained
usage. These include:

Shortly after the CFPB published its report the FTC issued a • CFPB staff to identify potential interpretative guidance
blog post⁴ listing three principles which it suggests should or rules to issue with the goal of ensuring that BNPL
guide the business practices of businesses offering BNPL providers adhere to many of the baseline protections
payment options as a retailer or BNPL provider, as well as that Congress has already established for credit cards.
for those entities that play a role in the BNPL ecosystem as • CFPB staff to “identify the data surveillance practices
a marketer, collector etc: that BNPL providers engage in that may need to be
• Claims, including claims about fees associated with curtailed.” In particular, the CFPB will be examining
BNPL products, must be true for the typical consumer. some of the types of demographic, transactional and
behavioural data that is collected for uses outside of the
• Do not underestimate the importance of considering the BNPL credit transaction, including for the purpose of
transaction from a consumer’s perspective. sponsored ad placements, sharing with merchants and
• The presence of multiple actors in the transaction, such developing user-specific discounting practices.
as the retailer that sells the goods, does not shield a • CFPB staff will continue to formulate options on how
BNPL company from liability. the industry and consumer reporting companies can
In short the FTC issued a clear reminder that basic develop appropriate and accurate credit reporting
consumer protection ground rules of the FTC Act apply. practices.
The main message for businesses that play a role in BNPL • CFPB will take steps to ensure that BNPL providers are
payment plans is to avoid deceptive or unfair tactics in subjected to appropriate supervisory examinations.
what they say to consumers, how they convey material
information, and how they treat consumers throughout the On November 16, 2022, the U.S. Department of the Treasury,
lifecycle of the transaction. in consultation with the White House Competition Council,
announced support and encouragement for the CFPB’s
inquiries into BNPL providers, in a report finding that the
fintech industry requires additional oversight to close gaps,
prevent abuses, and protect consumers.

4 For further information please refer to the blog posting on Regulation Tomorrow entitled ‘Buy Now, Pay Later (but take note of the immediate application of the FTC Act)’.

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Canada
Introduction The FCAC’s pilot study highlights that BNPL services
are an important and sometimes necessary function for
In Canada, BNPL grew in popularity during the COVID-19
some consumers, particularly those consumers who are
pandemic alongside a broader e-commerce boom. BNPL
experiencing short-term financial constraints or who wish
is becoming an increasingly common payment option for
to avoid high interest rates associated with credit cards.
retailers and other merchants across Canada as it enables
However, the pilot study also pointed out the negative
their customers to purchase goods and services instantly
consequences on consumers resulting from over-borrowing
and defer or spread out payments. However, there are
and over-indebtedness, which disproportionately impact
increasing regulatory concerns that it may encourage debt
financially vulnerable Canadians. The pilot study also sheds
and overspending, particularly among younger and more
light on the impact that missed payments can have on a
vulnerable consumers.
consumer’s overall financial well-being and the need for
Regulatory Position greater consumer education regarding the key features of
BNPL services, the impact of these services on users’ credit
In Canada, following increased concerns surrounding
scores, and BNPL dispute resolution processes.
the rapid growth of BNPL and its associated risks,
including over-indebtedness and delinquencies, calls The Future
for regulatory intervention and scrutiny into BNPL have
Although the study concluded that there are potential
gained momentum. In some provinces, existing consumer
risks associated with BNPL services, the data collected
protection regulations already provide some protection for
suggested that a majority of BNPL users had a positive
BNPL users, such as requirements for BNPL providers to
experience with the service. Following the pilot study, the
obtain licenses in order to offer such products to consumers
FCAC confirmed that it would continue to monitor the
and restrictions on advertisements.
evolution of the domestic BNPL market by conducting
Review targeted follow-up research. Additionally, the FCAC
indicated that it would engage with provincial and territorial
In November 2021, the Financial Consumer Agency of
financial oversight authorities to support the sharing of
Canada (FCAC) issued its findings in connection with a
insights and expertise as well as the harmonization of
pilot study on BNPL services in Canada. The pilot study
approaches to oversight.
involved a survey of 1,034 Canadians aged 18 years or older.
Approximately 34% of respondents indicated that they were
familiar with BNPL services and 8% indicated that they had
used at least one BNPL service during the survey reference
period. Of those surveyed who had used BNPL services,
39% noted that they had used the service as they “couldn’t
afford the entire purchase right away” and 41% noted that
that they had used the service “more than once”.

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European Union
Introduction In light of this the draft Directive brings within scope BNPL
schemes by bringing within scope credit agreements where
At the moment, the regulation of consumer credit is
the credit is granted free of interest and without any other
covered by the Consumer Credit Directive (CCD) that
charges, and credit agreements under the terms of which
Member States had to transpose into their national laws by
the credit has to be repaid within three months and only
June 11, 2010.
insignificant charges are payable.
BNPL usually does not require interest rate payments and
In June 2022, the Council of the EU agreed its general
therefore it may fall within the scope of the current CCD
approach to the draft Directive which provided the Council
exclusions that relate to ‘credit agreements where the credit
Presidency with a mandate for further discussions with
is granted free of interest and without any other charges
the European Parliament. In July 2022, the European
and credit agreements under the terms of which the credit
Parliament’s Committee for Internal Market and Consumer
has to be repaid within three months and only insignificant
Protection adopted its report on the proposed Directive.
charges are payable’ (Article 2(2)(f)). Moreover, many small-
amount BNPL loans (i.e. smaller than EUR 200) may also The revisions that the Council put forward included that,
fall out of the scope of the current CCD (which covers only under certain conditions, deferred payments as well as
loans between EUR 200 to EUR 75,000). deferred debit cards be excluded from scope. Whilst
BNPL services could fit within this definition the Council
New proposals
specifically stated that BNPL were included within the
On July 1, 2021, the European Commission (Commission) scope of the draft Directive. However, the Council also
issued, as part of its New Consumer Agenda, a proposal for suggested that the following types of product, to which
a Directive on consumer credit repealing and replacing the BNPL may fall into, could benefit from an “optional partial
CDD. The Commission also published the Annexes to the derogation”: credit loans of less than EUR 2000; credit
draft Directive, an impact assessment report, an executive in the form of an overdraft facility; credit agreement free
summary of the report and a factsheet. of interest and any other charges; and contracts with a
maximum period of three months and negligible costs.
The impact assessment report noted that in respect of
For these types of credit Member States would be able to
BNPL many consumers seem not to realise that the product
opt for a regime that reduces pre-contractual information
is credit. It added that interest free credit agreements
requirements and disclosure requirements and removes a
can entail risks for consumers in the sense that although
provisions on early repayment. A further amendment that
they may appear as having low or no costs linked to them
may also assist BNPL providers relates to pre-contractual
(they are often presented as ‘0% interest rate’ offers), the
information. Notwithstanding the possibility of the optional
underlying business model for offering such loans is often
partial derogation, the Commission’s proposal suggested
based on high fees for late or missed payments, aspects
creditors had to send pre-contractual information to
frequently ignored by consumers. It added that the risk
the consumer “at least one day before” the conclusion
lies in the fact that consumers were often poorly informed
of the agreement. The Council suggested providing the
about the conditions of the credit, which were also often
information “in good time”, providing more flexibility.
very strict, and that they promoted quick decisions taking
advantage of behavioural biases (such as present bias
because the benefit of deferred payments were presented
but not potential future implications).

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The Netherlands
In September 2022, the European Parliament agreed its Introduction
position on the draft Directive. In its press release the
It has been reported in the press that the BNPL industry
European Parliament stated, among other things, that “it
in the Netherlands has recorded strong growth in the
should be up to countries to decide whether they apply the
Netherlands.
consumer credit rules to some loans, such as small loans
up to EUR 200, interest-free loans and loans to be repaid Current regulation
within three months and with minor changes”.
In the Netherlands the CCD has been implemented. The
On December 2, 2022 the European Parliament and the implementation act (Act) entered into force on May 25,
Council reached provisional political agreement on the draft 2011. The Act introduced a new chapter on consumer
Directive. At the time of writing the European Parliament credit agreements into the Dutch Civil Code and amended
and the Council needed to formally adopt the political the Financial Markets Supervision Act and the Consumer
agreement and publish an updated version of the draft Credit Act. The Degree on Conduct of Business Supervision
Directive. of Financial Undertakings (Wet op het financieel toezicht,
Wft) was also amended.

As mentioned in the section concerning Europe, BNPL

services fall outside the scope of the CCD. In Dutch law
the exception is set out in Article 1:20(1)(e) of the Wft which
provides that offering credit that must be repaid within a
period of three months and for which only insignificant
costs are charged does not fall under the scope of the Wft.
BNPL providers in the Netherlands use this exception.

The Netherlands supports the Commission’s proposal for a

new Consumer Credit Directive.

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France Germany
Introduction Introduction
The BNPL market in France is growing and has seen more The BNPL market has existed in Germany since the early
investment from firms in the sector where players are 1970s and remains popular.
seeking to boost innovation and drive adoption among
French consumers. Like many other jurisdictions the growth Regulation
of the BNPL market has been driven by the COVID-19 Germany is a highly regulated jurisdiction. BNPL services
pandemic and with consumers seeking higher purchasing and their offer have to be carefully construed as they may
power and the ability to split their purchases into interest trigger licence requirements. It has to be ensured that use is
free instalments. made of existing exemptions. From a regulatory perspective
three basic models are broadly used being those based on:
Regulatory regime (i) credit business, such activity is viewed as the granting
In France BNPL schemes are excluded from the consumer of money loans and as such a banking licence is required
credit regime when specific conditions are met. However, even if no other regulated activity such as deposit taking
French banking rules still apply and BNPL is considered is conducted; (ii) factoring as a type of financial service
to be credit, therefore bringing it within scope of the with a merchant offering consumers instalment payments
French banking monopoly rules. French regulation also with the deferred purchase price claims being assigned to
requires specific licences to offer payment in more than 4 the BNPL provider. The ongoing purchasing of receivables
instalments. In light of this, BNPL providers have sought is considered to be factoring and triggers a licensing
licences as a ‘Payment institution’ and ‘Financing company’. requirement for the BNPL provider under the German
It is also worth noting that at present French authorities are Banking Act (Kreditwesengesetz – KWG) the German
looking at financial inclusion. BNPL is a form of credit, and Payment Services Supervision Act (ZAG). However, the
with all credit comes risk and indebtedness. sales financing by the merchant does not qualify as credit
business and will not trigger a licensing requirement; and
New Directive (iii) the authorisation of payment services or electronic
Whilst the EU’s current consumer credit regulatory money services may also be the basis for certain BNPL
framework stems from the CDD, on June 9, 2022 the services. Under the German Payment Services Supervision
Council agreed to revise the Directive in order to Act such institutions may provide credit subject to it not
modernize and enhance protection at the European level exceeding 12 months.
for consumers taking out such credit. The European
Commission’s legislative proposal significantly broadens
Recent developments
the scope of products that will need to comply with stricter In terms of recent developments, the German Federal
credit rules, including BNPL products. Financial Supervisory Authority (BaFin) has issued
guidance for consumers (last updated in September 2022)
It has been proposed that pre-contractual information
reminding that for amounts lower than EUR 200 consumer
forms will have to be merged to allow consumers to
protection provisions do not apply and that debt could
compare credit offers more efficiently, key information
accumulate quickly given that the psychological barrier
to be presented on the first page – giving consumers
to use such payment types is low. Also, costs may be
these details upfront and improving readability and ease
disproportionately high. BaFin also reminded firms that
of understanding. Other changes aim to improve legal
depending on their business model, offering credit-based
certainty, including clarifications on the creditworthiness
payment methods may trigger authorisation requirements
assessment, the definition of a maximum time limit to under the KWG.
exercise the right of withdrawal, clarifications on the
admission procedures, and penalties, etc.

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Luxembourg Italy
Introduction Introduction
Like other countries BNPL is not a directly regulated financial On October 28, 2022, the Bank of Italy (BoI) issued a
service in Luxembourg. However, like other Member States communication (Communication) on BNPL schemes to
BNPL may be regulated as consumer credit. The CCD has draw the attention of consumers on the prevalent forms of
been implemented in Luxembourg. Provisions on consumer BNPL in the Italian market, the related potential risks and
credit were introduced in the Consumer Code by the the means of protection afforded to customers by banking
Luxembourg law of April 8, 2011. However, the provisions of transparency regulations.
the Consumer Code regarding consumer credit agreements
Currently, Italy has not implemented an overarching
do not apply to credit agreements where the total amount of
regulation for BNPL and, therefore, the applicable rules and
the credit is less than EUR 200 or more than EUR 75,000.
the relative protections depend on how the transaction is
Licence implemented in practice with the result that the assessment
is carried out on a case-by-case basis.
In addition, depending on the business model, consideration
may also have to be given as to whether a financial services, Forms of BNPL
lending licence or payment services licence is required.
Lending on a professional basis usually requires a banking According to the Communication, under the traditional
licence in accordance with the Financial Sector Law. BNPL scheme: (i) three parties are involved: the consumer
Luxembourg banks are authorised and supervised by the (i.e. the purchaser of goods and services), the seller and
Commission de Surveillance du Secteur Financier (CSSF) a third party, who, on the basis of an agreement with
and are subject to EU regulations and national legislation. the seller, allows the consumer to defer payment, even
Entities that provide lending services that do not qualify as by instalments; (ii) amounts are usually relatively small
banks may fall under the scope of the Financial Sector Law, and can be offered either online or in physical stores; (iii)
which requires an entity to be licensed as a professional no interest or charges are envisaged to be paid by the
performing lending operations. The authorisation of payment consumer (though penalties are due in the event of late
services or electronic money services may also be the basis or non-payment); (iv) simplified or no creditworthiness
for certain BNPL services. Under Articles 6 and 24-2 of the assessment is conducted.
Law of 10 November 2009 on payment services, on the Often, such deferred payment is granted directly to the
activity of electronic money institution and settlement finality consumer by a bank or financial intermediary, which
in payment and securities settlement systems, as amended, intervenes in the transaction by virtue of an agreement
no persons established in Luxembourg may provide payment with the seller. It being understood that the inclusion of a
services or issue electronic money without holding a written bank or a financial intermediary in the scheme is not strictly
authorisation as a payment institution or electronic money necessary (as the scheme benefits from an exemption from
institution the consumers’ credit license requirements).
by the CSSF.

E-commerce regulation
Finally, BNPL provided on an internet platform/market place
shall also comply with e-commerce consumer protection
which is of public order (e.g. regulation on distance selling,
incl. withdrawal period and mandatory prior information).
It goes without saying that the regulation on personal data
protection must also be respected.

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A variation to this traditional BNPL scheme may contain As for the overall clarity of the contractual relationship,
elements mentioned under points (ii) and (iii) above, where BNPL is built as a combination of payment deferral
namely, if relevant sums amount to at least EUR 200 and and subsequent credit transfer, the client may not be in a
a fee is paid by the consumer. The presence of these position to clearly identify its counter-party (particularly
elements would qualify the activity as consumer credit with regard to the payment aspect of the sale of goods or
thus triggering the application of banking transparency services). Besides, the sellers’ role as intermediary in the
regulation (aimed at ensuring an adequate level of clients’ transaction may result in the consumer being misled into
protection). believing that the safeguards typically available in a bank-
client relationship apply.
The Communication further illustrates an additional BNPL
model, which, in the absence of interest or other charges Finally, uncertainty on the qualification of a BNPL initiative
on the client, combines: (a) a payment delay granted to may generally affect the profitability of the business
the consumer directly by the seller at the time of sale, and market participants may need to rely on a specific
immediately followed by (b) a transfer of such payment assessment thus reducing flexibility in their operational
delay (which the BoI qualifies in terms of “receivable arrangements.
transfer”) from the seller to a bank or financial intermediary.
Usually, the possibility for the seller to execute such transfer The means of customer protections:
is already foreseen in the contract between seller and a way forward
consumer. At present, the fragmentation of the regulatory landscape
may be perceived as detrimental to clients. Indeed, while
Contrary to the traditional scheme qualifying as consumer
some models of BNPL are highly regulated, others are
credit (either when implemented directly by a bank or a
not. In certain cases, for comparable business models,
financial intermediary or because the variation of certain
companies may end up being subject to banking
key elements occurred), in the context of this additional
transparency regulation and BoI’s supervision or be fully
form of BNPL model, banking transparency regulation and
exempted.
BoI’s supervision do not apply.
However, the increasing diffusion of BNPL initiatives are
Potential risks pushing regulators to seek a clear and stable reply. A good
The absence of a comprehensive regulation of BNPL may opportunity may be the current review of the European
pose a number of risks to consumers. Directive on consumer credit, as the proposed renewed
Directive may include all or part of BNPL within its scope
The ease of access to BNPL products and the fact that
of application. This would also create a level playing field
BNPL is usually relied upon to purchase goods and services
across Europe, and lower compliance costs for BNPL
for small amounts could encourage purchases that are not
operators and merchants alike.
fully conscious and, therefore, potentially not sustainable for
the client, exposing him/her to a risk of over-indebtedness.

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Australia
Introduction 4. Making sure the BNPL product or service is suitable for
the customer. This is to be achieved via the following
Australia’s BNPL industry continues to grow and evolve.
(a) by the firm assessing the customer’s suitability for
While these arrangements are working for most consumers,
the desired BNPL product or service. This is done by
some are incurring missed payment fees and report
assessing the customer’s vulnerability and their ability
being financially stressed. BNPL products in Australia are
to make the scheduled repayments, using a range of
not currently regulated under consumer credit laws and
data points. For existing customers, this includes taking
instead many providers of BNPL products adhere to an
their repayment history into account (looking at whether
industry code of conduct (the Australian Finance Industry
they have made payments on time) (b) if the customer is
Association (AFIA) BNPL Code of Practice).
behind on their repayments, the firm will not provide the
AFIA BNPL Code customer with any additional BNPL products or services
(c) for amounts over either $2,000 or $3,000 (depending
The AFIA BNPL Code of Practice (the Code) came into
on whether the customer is a new or existing customer),
effect on March 1, 2021. AFIA BNPL members have made
the firm will use data sourced either from the customer
nine key commitments to customers:
or a third-party (d) for BNPL amounts over $15,000, the
1. Focus on customers. By the firm (a) providing high firm will need to use both the customer’s data and third-
quality products and services that are inclusive and party-sourced data when making a decision (e) in terms
accessible (b) ensuring that staff treat customers with of what is meant by data, for example, the firm may
sensitivity, understanding and best industry practice, need to look at a customer’s bank statement to verify
especially when it comes to the factors that are or could their income (f) in terms of third party sourced data, for
contribute to the customer being financially vulnerable example, the firm may need to conduct a credit check on
(c) having safeguards in place to ensure the product a customer.
or service is suitable for the customer, including age 5. Undertake an ongoing review of the suitability of BNPL
restrictions (18+) and being responsive to feedback and products or services. By (a) monitoring how existing
complaints. customers are using the firm’s BNPL products and
2. Fair, honest and ethical in all dealings. By the firm (a) not services. This will allow the firm to better understand
allowing their platforms to be used to purchase goods vulnerable or unsuitable customers as well as enhance
or services that have legal and regulatory restrictions the suitability of its products and services (b) using a
on finance being provided for them, e.g. gambling and variety of data, feedback and complaint resolutions in its
illegal weapons (b) taking steps to ensure that there is monitoring.
no unlawful unsolicited marketing or selling of BNPL 6. Dealing fairly with complaints. By (a) providing an
products or services. accessible and transparent complaint process that
3. Keeping the customer informed about product or complies with the Australian Securities and Investment
service. By the firm (a) being transparent about Commission’s internal dispute resolution standards
instalments, features and fees involved with the (b) acknowledging all complaints within 1 business
customer’s BNPL payments (b) having an inclusive and day, or as soon as practicable, and providing a written
accessible digital platform that will provide accurate response within 10 business days from the date of the
resources and information before and throughout the complaint (c) being a member of the Australian Financial
customer’s BNPL contract. Complaints Authority (AFCA) so that a customer
may lodge a complaint with them, if the customer is
dissatisfied with the response (d) being able to escalate

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the complaint to the BNPL Code Compliance Committee Three (3) potential regulatory approaches/options are
should the customer not be satisfied with the AFCA’s presented under the options paper. Under the first
response. two (2) options, the Australian government intends to
further strengthen the Code and make parts of the Code
7. Offering financial hardship assistance. By (a) ensuring
enforceable by ASIC (our local Australian regulator). On the
the customer can submit a Hardship Request that is fair
third option, BNPL products would essentially be treated
and accessible (b) the firm responding to the customer’s
the same as credit cards. Depending on the option chosen,
Hardship Request within 21 days of receiving it and
BNPL providers may also be required to hold an Australian
clearly communicating the options available to assist
credit licence to continue to offer BNPL products. Whether
with the situation (c) the firm freezing any late fees while
or not this eventuates will likely depend on stakeholder
the firm is considering the customer’s Hardship Request,
comments on the Australian government’s consultation/
and where it finds it cannot grant the customer hardship
options paper which will close on December 23, 2022.
assistance, it will give the customer fair and justified
reasons. Design and distribution obligations
8. Comply with legal and industry obligations. By (a) the In addition to the Code, BNPL products fall within scope
firm maintaining good practice, respecting customers’ of the Australian Securities & Investments Commission
privacy and not permitting their personal or financial (ASIC) design and distribution obligations located in
information to be shared with other finance providers Part 7.8A of the Corporations Act 2001. These obligations
unless used for the purpose of credit reporting or the require the industry to design fit-for-purpose products that
firm receives the customer’s express consent (b) the firm meet consumer needs, and ensure that their products are
will comply with relevant unfair contract laws. reaching the right consumers.
9. Support and promote the Code. By (a) the firm
As far as ASIC is concerned the design and distribution
promoting the Code on its website and other digital
obligations, which commenced in October last year, are a
platforms (b) the firm regularly training staff so that they
‘gamechanger’ for the regulation of financial product design
understand the various aspects of the Code and how to
and distribution. They mark a very deliberate move away
comply with it.
from a consumer protection framework which relied heavily
on disclosure as a harm mitigation, with the onus on the
Recently, the AFIA has launched an independent review
reader to comprehend and assess its risk. Given that a year
of the Code at a time when the Australian government
has now passed since their introduction, ASIC has shifted
has repeatedly signalled that it intends to bring the BNPL
its focus from “facilitating implementation” to
sector under consumer credit laws. A report on the review’s
“active supervision and enforcement”.
findings is due March 1, 2023.
Currently, ASIC has a number of projects relating to the
Interestingly, where a signatory does not comply with the
design and distribution obligations. This includes continued
Code, this does not presently attract any penalties nor is
monitoring of developments in the BNPL industry, including
it enforceable by the Australian regulator. On November
new entrants. It is also undertaking reviews of other
21, 2022, the Australian government issued a consultation/
alternative credit products and services such as wage
options paper on regulating BNPL products in Australia.
advance.
This paper, which was long expected, is intended to close
any regulatory “gaps” in the market to protect consumer
interests.

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Hong Kong
ASIC is also reviewing the product governance Introduction
arrangements of a number of BNPL providers, including
On September 2, 2022, the Hong Kong Monetary Authority
a review of how their target market determinations were
(HKMA) issued a new webpage on its website reporting
developed, and the data and metrics that inform their
that a number of BNPL products had recently emerged
review triggers. The regulator will continue to collect
in Hong Kong. Currently, BNPL products are still at the
data from providers to test whether their target market
initial stage of development in Hong Kong with most being
determinations are and remain appropriate. ASIC will
offered by fintech firms although some local banks have
assess triggers to ensure they reflect product performance.
started launching instalment payment products that are
Such triggers could include whether there is a particular
marketed as BNPL.
cohort of consumers who are incurring repeated missed
payment fees and for whom the product may not be The HKMA stated on its webpage that in practice, BNPL
appropriate. products were not much different from unsecured personal
loans and as such consumers needed to be mindful of the
ASIC expects to conclude the project and finalise its
related risks of borrowing. In particular, the HKMA drew
findings next year. It will be making a public statement on
attention to some online shopping platforms which were
the outcomes of this review.
placing BNPL alongside other payment methods such as
Further information regarding BNPL in Australia can be credit cards and therefore the regulator was concerned that
found in our briefing note ‘Buy now, pay later, regulate soon’. consumers may perceive BNPL as just another payment
option. With such packaging, some consumers may
unintentionally spend beyond their means.

Circular
The webpage also announced that the HKMA had issued a
circular to authorised institutions on BNPL products.
The circular required authorised institutions to implement
seven consumer protection measures where either or
both criteria concerning product features and naming/
promotional approach are met.

In terms of product features the HKMA stated that the

measures in the circular apply to BNPL products (i.e.
payment by instalments for the purchase of goods or
services) having features similar to instalment payment
plans with typically shorter repayment periods with a fee or
charge if repayment does not occur on time or other similar
innovative consumer credit products that may emerge in
the future, even if they may not be called BNPL.

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In terms of a naming/promotional approach, the HKMA 3. When engaging or partnering with e-commerce
stated that if authorised institutions chose to use a term platforms, authorised institutions should assess the
very similar to “(Action word) Now, Pay Later” in the name potential implication on impulsive borrowing if the BNPL
and/or market or promote any credit product in such a products are set as the default or preferred choice of
way those products would be deemed as BNPL products payment methods.
irrespective of the actual features of the product.
4. Authorised institutions must ensure that the relevant
The circular also drew attention to consumer protection fees and interest charges are disclosed in a clear
measures stating that authorised institutions should follow manner in the advertising and promotional materials
all consumer protection measures as set out in the Code of of BNPL products, and the relevant fees and interest
Banking Practice and Treat Customers Fairly Charter where charges should be taken into account in the calculation
applicable, taking into account the nature of the BNPL of Annualised Percentage Rate for customers’ reference.
product. In addition, other relevant guidance issued by the Where a BNPL product is promoted as “interest-free”,
HKMA would be relevant, such as the HKMA’s circular of any other fees or charges applicable should be included
September 4, 2020 on “Enhanced Disclosure Measures in in the same piece of advertising material.
respect of Digital Platforms for the Application of Unsecured 5. Authorised institutions are required to specify in the Key
Loan and Credit Card Products”. Furthermore, authorised Facts Statement of a BNPL product that, if the borrower
institutions were expected to comply with other applicable is overdue in repayment, it may adversely affect the
legal and regulatory requirements, including the Personal credit records of the customer, and may even affect
Data (Privacy) Ordinance (PDPO) and any relevant codes access to credit in the future.
of practice issued by the Privacy Commissioner for Personal
Data on compliance with the PDPO. 6. Authorised institutions should ensure that the customer
is duly informed about whether and how the chargeback
Seven consumer protection measures mechanism is applicable to the BNPL product.
The seven consumer protection measures referred to in the 7. During the approval process for any applications for
circular can be summarised as: BNPL products, authorised institutions must assess
the applicant’s credit status and take into account the
1. Authorised institutions must include the educational
applicant’s ability to repay.
message of “To borrow or not to borrow? Borrow only
if you can repay!” in the advertising and promotional The circular also warned authorised institutions that they
materials for BNPL products, a requirement currently in remained accountable for the actions of any third parties
place for other loan products for retail customers and they engage or partner with when launching BNPL
SMEs. products. As a result, banks are expected to put in place
proper mechanisms and controls to assess and manage the
2. Authorised institutions should not create an impression
potential issues and relevant risks (e.g. consumer protection
that BNPL does not entail borrowing. Authorised
issues, complaints handling, reputation risks, etc.) arising
institutions must clearly and prominently disclose in the
from such engagements or partnerships.
marketing and promotional materials of BNPL products
This includes observing the requirements in the circular.
that they are “credit products”.
Authorised institutions are required to implement the
consumer protection measures by no later than the
end of this year.

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Singapore
Introduction In terms of creditworthiness assessments, the code
provides that each BNPL provider will permit customers
In Singapore BNPL transactions amounted to $440m
to accumulate no more than SGD 2,000 in outstanding
last year. This is up from $114m in 2020. However, BNPL
payments at any given time, unless they complete an
transactions were very small when compared to other
additional credit assessment which considers, among
means of consumer payment. For example, they were much
other things, customer income information and customer
less than 1% of total credit card and debit card payments
credit information shared across all BNPL firms. Should a
last year.
customer fail to meet their payment obligations, the BNPL
At present the Monetary Authority of Singapore (MAS) is provider will suspend the customer’s access and use of its
closely monitoring the BNPL sector. It is also studying the services. The BNPL provider will also review and monitor
experience of other countries where BNPL schemes have on an ongoing basis how a customer is using its services;
taken off more strongly. MAS has also worked with the for example, a customer’s repeated failure to pay bills on
media highlighting the pitfalls of taking on excessive credit, time may lead to the BNPL provider deciding that its BNPL
including the considerations that consumers should bear services are not suitable for the customer.
in mind before entering into a BNPL scheme. Furthermore
As for fees and disclosures, BNPL providers will cap all
BNPL providers in Singapore have to set a minimum
fees, including late fees and other charges. Fees and
account opening age requirement of at least 18 years old.
interest, if any, will not be compounded. All fees and fee-
Industry self-regulation related structures will also be communicated in a manner
that is clear and transparent to consumers. Consumers are
Currently, MAS is of the view that effective industry self-
also entitled to make full repayment with BNPL providers
regulation, through an industry code, should adequately
at any time, without early repayment fees. BNPL providers
mitigate the risks in the BNPL sector. Such an industry
will each ensure that consumers have access to account
code, produced by a working group of industry players and
statements consolidating the total outstanding balance of
the Singapore FinTech Association under the guidance of
purchases made through the respective BNPL provider.
MAS, was launched on October 20, 2022.
BNPL providers will also ensure that advertisements of
The purpose of the code is to mitigate the risk of consumer
products and services comply with applicable legislation
over-indebtedness, and establish minimum safeguards to
and relevant advertising codes and that their advertising
ensure that consumer interests are well-protected when
and promotional materials will be clear and not misleading
using BNPL schemes.
or deceptive.
In order to crystallise best practice the code includes
BNPL providers will allow consumers to voluntarily exclude
coverage of: creditworthiness safeguards, fair, transparent
themselves from BNPL services and promotional materials
fees and clear disclosures, ethical marketing practices,
once this has been communicated in writing. Providers will
voluntary exceptions, financial hardship assistance and
retain a list of the consumers who have voluntarily excluded
external information sharing.
themselves from their services. BNPL providers will also not
allow any further transactions when consumers are facing
financial hardship and will commit not to initiate bankruptcy
proceedings against their customers.

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Shanghai
Information relating to a customer’s outstanding BNPL In China the BNPL market is growing despite the difficult
balance, missed payments, delinquencies and personal global economic conditions. Unlike many other markets
identifying information will be shared on an ongoing around the globe, the Chinese market is very familiar with
basis with an independent service provider for credit cashless payments, e-commence and online shopping
risk assessment purposes only. Such information will given its zero-COVID 19 policy which has urged consumers
subsequently be made available only to this service to avoid offline transactions.
provider and other BNPL providers who are compliant
with the code. They will commit to using the information However, as in other jurisdictions there are concerns that
only for credit risk assessment purposes, and are certified BNPL may encourage spending which can sometimes be
with the Info-Communications Media Development excessive. Some outstanding BNPL balances may have to
Authority Data Protection Trustmark. be declared as non-performing loans when the borrower
defaults or is late in making a payment. Significant levels of
To ensure compliance with the code, BNPL providers will non-performing credit may impact financial stability.
be required to undergo an audit and accreditation process
which will allow them to display an accredited trust mark Whilst China does not directly regulate BNPL products it
showing customers that they are compliant with the code. has started to strictly regulate digital finance platforms,
The establishment of a credit information sharing bureau, some of which provide interest-free short term financing
the accreditation process and awarding the trust mark is similar to the BNPL model.
expected to be completed in late 2023.

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South Africa

A significant portion of the South African public is From a commercial perspective, BNPL models benefit
dependent on consumer credit, making it unsurprising that merchants, consumers and BNPL providers - the
the BNPL model is one that is fast gaining momentum in merchants increase their sales, consumers generally buy
the country. BNPL products have increased significantly more as they don’t have to factor in the cost of credit or
over the last four to eight quarters in South Africa, as noted the necessity for cash on hand, and the BNPL providers
by Research and Markets⁵. benefit from merchant commissions and default penalties
(assuming the customer does not meet their repayment
The BNPL model can be seen as an extension of the
obligations within the stipulated timeframe).
“lay-buy” system, in that it allows for the purchase of goods
in instances where a customer may not have the necessary At the forefront of the South African BNPL movement,
cash at hand. The “lay-buy” system allows for goods to be are Payflex and Float.
purchased against an initial down payment, with agreed
monthly interest free repayments for the remainder of the Various other local providers are present in the BNPL
purchase price. The customer collects the goods only once sector, including TymeBank’s “MoreTyme” offering.
the full purchase price has been paid. The increased interest in BNPL models has also attracted
Taking the lay-buy to the next level, BNPL also affords the foreign providers, looking to establish a presence in
customer interest free instalments (usually over a six week South Africa. These include the acquisition of Payflex by
period), but with the added benefit of being able to collect Australia-based global BNPL firm Zip, and the acquisition
the goods immediately upon first payment. by Mauritian financial services provider Weaver Fintech,
of an 85% stake in Cape Town-based fintech startup,
From a regulatory perspective, BNPL models fall outside PayJustNow.
the ambit of the National Credit Act, 2005 (NCA) -
legislation designed to protect the consumer in the credit As the credit demand among small to medium sized entities
market. Subject to prescribed conditions, the NCA applies grows in South Africa, particularly in light of the current
to every credit agreement between parties dealing at economic climate, Research and Markets notes that it
arm’s length and concluded, or having an effect within, expects more firms to enter the BNPL segment in South
South Africa. BNPL agreements are typically regarded as Africa, in the short to medium term.
‘incidental’ credit, in the sense that the parties do not intend
to enter into a credit agreement. While payment is deferred/
instalment based, the fact that no interest is charged,
means that BNPL providers do not need to register as
credit providers under the NCA, and as a result the NCA
has limited application to BNPL models.

5 South Africa Buy Now Pay Later Business and Investment Opportunities - 75+ KPIs on Buy Now Pay Later Trends by End-Use Sectors, Operational KPIs, Market Share, Retail Product Dynamics, and
Consumer Demographics - Q3 2022 Update (researchandmarkets.com)

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 Regulation Around the World
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United Arab Emirates (DIFC)

Introduction
In Dubai the BNPL industry is evolving with fintech firms
leading the way. The fintech firms that are involved with
BNPL tend to be unregulated and have a presence outside
the DIFC in other free zones which are not financial free
zones and can therefore be considered, to a certain extent,
as part of the ‘onshore’ UAE regime. Some BNPL operators
are carrying on business in the UAE through a system of
contracts where their DIFC entity acts as a non-regulated
entity that only provides the technology aspect for a UAE
‘onshore’ entity. It is likely that these UAE onshore entities
may have agreements with locally licensed financial
institutions such as banks to provide certain regulated
financial services for them.

Current position
At the time of writing there had been no recent regulatory
announcements concerning BNPL from the Dubai Financial
Services Authority (DFSA).

The current regulatory position is that carrying on a

business of providing credit in or from the DIFC requires
a licence from the DFSA. DFSA-regulated firms are not
allowed to provide credit to retail clients when carrying out
their business in or from the DIFC. The one exception to this
rule is where the client is another business, and the credit is
provided for the purposes of that business. A firm wishing
to provide BNPL services in or from the DIFC needs a
licence from the DFSA and will be restricted as to the retail
clients to whom they may provide the service.

In the Middle East generally, BNPL platforms are becoming

more popular although many are in the early stages of
development. Islamic law forbids the charging of interest
on loans. BNPL platforms skirt round this on the basis that
they typically profit through merchant charges and late fees
rather than interest payments.

23
Regulation Around the World
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Want to hear more about international

regulatory developments concerning
BNPL?
Listen to our BNPL podcast
Our latest Regulation Tomorrow podcast features our team
members in the United Kingdom, United States, and Australia
discussing the latest regulatory developments concerning
BNPL.

Regulation
Tomorrow
Podcast

Read our BNPL articles

Buy now pay later regulate soon

Buy Now, Pay Later (but take note of the immediate

application of the FTC Act)

All signs point to increased US regulation of Buy Now,

Pay Later

Watch our BNPL webinar

The BNPL global landscape and latest trends

Previous editions
To view previous editions of Regulation Around the World,
visit our webpage which contains previous updaters and
podcasts which apply a global lens to a hot topic in the
financial services industry. Previous instalments include
operational resilience, money laundering, ESG, crypto-assets
and horizon scanning.

24
 Regulation around the world
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Why we are the go-to global law firm

for BNPL advice

Regulatory strength
Our regulatory team is recognized for supporting clients at the very forefront of
the financial services industry and we are regularly instructed by some of the
world’s leading global institutions on complex, high-value and multijurisdictional
matters. A number of our team have worked within the world’s foremost financial
regulators including the FCA, SEC, DFSA, AFM, in government including within
the DOJ and HM Treasury, and in industry.

Leaders in the FinTech and Payments sector

Our multidisciplinary global FinTech practice advises clients on the legal,
regulatory and policy challenges related to the development and deployment
of technology in the financial services sector. We integrate a wide range of
industry and technical expertise and legal competencies and operate across the
globe, advising some of the largest FinTech and Payments brands internationally.
We are recognised as a leading law firm in nine markets across the globe in the
Chambers FinTech guide 2023 (Canada, China/HK, France, Germany, Mexico,
Singapore, UAE, UK, and USA).

Global connectivity
Through our global network of 80+ lawyers in 20+ offices with knowledge of
local and international laws and regulation, we provide a high-quality centralised
service wherever our clients need us.

Get in touch if we can help you navigate the BNPL market.

25
Regulation Around the World
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Global key contacts

United Kingdom

Jonathan Herbst Simon Lovegrove

Global Head of Financial Services and Global Director of Financial Services
Regulation, London Knowledge, Innovation and Product, London
Tel +44 20 7444 3166 Tel +44 20 7444 3110
[email protected] [email protected]

Hannah Meakin Matthew Gregory

Partner, London Special Counsel, EMEA
Tel +44 20 7444 2102 Tel +44 7725 496651
[email protected] [email protected]

United States

Stephen Aschettino Celia Cohen

Head of Fintech, United States, New York Co-Head of Financial Institutions, New York
Tel +1 212 318 3282 Tel +1 212 318 3350
[email protected] [email protected]

Kevin Harnisch Tim Byrne

Head of Regulation, Investigations, Partner, New York
Securities and Compliance, Washington DC Tel +1 212 318 3260
Tel +1 202 662 4520 [email protected]
[email protected]
Eamonn Moran
Tom Delaney Senior Counsel, Washington, DC
Partner, Washington Tel +1 202 662 4522
Tel +1 202 662 4531 [email protected]
[email protected]

Canada

Tim Stewart Andrew Grossman

Partner, Toronto Partner, Toronto
Tel +1 416 216 3985 Tel +1 416 216 2312
[email protected] [email protected]

Hong Kong Singapore

Etelka Bogardi Wilson Ang

Partner, Hong Kong Partner, Asia Head of Regulatory, Singapore
Tel +852 3405 2578 Tel +65 6309 5392
[email protected] [email protected]

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 Regulation Around the World
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Australia Shanghai

Jon Ireland Sun Hong

Partner, Sydney Partner, Shanghai
Tel +61 2 9330 8773 Tel +86 21 6137 7020
[email protected] [email protected]

James Morris South Africa

Partner, Sydney
Tel +61 2 9330 8902 Desiree Reddy
[email protected]
Director, Johannesburg
Tel +27 11 685 8673
Rajaee Rouhani [email protected]
Partner, Melbourne
Tel +61 3 8686 6239
[email protected] UAE

Matthew Shanahan
France Partner, Dubai
Tel +971 4 369 6343
Roberto Cristofolini [email protected]
Partner, Paris | Casablanca
Tel +33 1 56 59 52 45 | +212 529 09 00 60
[email protected] Italy

Sébastien Praicheux Salvatore Iannitti

Partner, Paris Partner, Milan
Tel +33 1 56 59 54 25 Tel +39 02 86359 429
[email protected] [email protected]

Pietro Altomani
Germany Counsel, Milan
Tel +39 02 86359 476
Caroline Herkströter [email protected]
Partner, Frankfurt
Tel +49 69 505096 444
[email protected]
Brussels

Anna Carrier
Ute Brunner-Reumann Consultant, Brussels
Counsel, Frankfurt Tel +32 2 237 61 46
Tel +49 69 505096 448 [email protected]
[email protected]

Luxembourg
Netherlands
Claire Guilbert
Floortje Nagelkerke Partner, Luxembourg
Partner, Amsterdam Tel +352 28 57 39 298
Tel +31 20 462 9426 [email protected]
[email protected]

Dorothee Ciolino
Nikolai de Koning
Counsel, Luxembourg
Senior Associate, Amsterdam
Tel +352 28 57 39 223
Tel +31 20 462 9407
[email protected]
[email protected]

27
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