Skip to content

Ready, Set, Regulate: A Three-Step Guide to Preparing for BNPL Regulation in APAC


September 15, 2023 | Jonathan Pryer

In the dynamic and fast-paced Buy Now, Pay Later (BNPL) sector, staying ahead of the curve has become a strategic imperative. This is particularly true in the Asia-Pacific (APAC) region, where the market for BNPL services is expanding at an unprecedented rate. This growth has been fueled by a surge in e-commerce and digital finance. However, with this rapid expansion, regulatory scrutiny has intensified.

Regulation has already arrived in Australia, where BNPL has been classified as a credit product, requiring BNPL providers to hold credit licenses. This is a significant shift, as it places BNPL services under the same regulatory umbrella as more traditional financial products. And the rest of the region is taking note.

Regulators across APAC are working to prevent consumer debt accumulation and promote financial literacy, creating new compliance requirements . While some providers have expressed dismay with the changing landscape, Quinlan and Associates found that the current BNPL models could cost APAC providers $5.2 billion by 2025. If BNPL players want to find long term success, they need to embrace change. The best way to do that is with flexible compliance strategies, supported by an agile technology foundation.

Keep reading to learn about the implications of Australia’s new regulation and what you can do to ensure your BNPL offering can prepare for upcoming regulation in your market.

Adapting to Regulation Across APAC

Australia’s Leading the Way

Australia is the home of some of the first Buy Now, Pay Later (BNPL) titans, Afterpay and Zip, and has one of the highest e-commerce penetration rates in the world. It is also the home of some of the first BNPL regulations to be implemented. 

In May 2023, after ongoing deliberation in response to the growing influence and impact of BNPL services on consumers’ financial behavior, the Australian Treasury announced it would be regulating BNPL services as consumer credit products. For BNPL lenders, the implications are far-reaching and will change the way these services are evaluated and offered. For consumers, these regulations aim to provide access to safe and responsible credit options – this will likely require additional affordability checks that will serve as protection but also introduce new steps to the previously barrier-free financing option. 

Want to dive deeper into the BNPL landscape of APAC? Check out our eBook.

Australia is only a glimpse of a possible future for BNPL not only in APAC, but across the world. Make sure you’re ready to… 

Evolve with Ease

As new regulatory changes emerge, BNPL providers must be ready to meet evolving compliance requirements. These are three major steps to take when preparing for new regulation:

  1. Assess current compliance and consumer protection

To anticipate the future, you have to understand the present. For smooth business operations, it’s wise to regularly check policies, procedures, and practices to confirm they are aligned with industry standards. Review and update your consumer protections, including customer affordability and transparency, as these elements will be highlighted in most new regulations, along with data privacy and KYC/AML. The right tech can help you automate compliance checks and complete the necessary onboarding process, with monitoring throughout the entire customer lifecycle. 

  1. Bolster your credit risk management strategy

Is your credit risk mitigation ironclad while being flexible enough to iterate as fast as the market moves? If not, now is the time to strengthen and test it. A strong risk strategy will help you identify and attract the right customers and ensure their creditworthiness reflects your risk appetite. Your strategy may change when regulations are introduced, so stress test risk models for different product lines or markets, and perform scenario analysis for future economic or regulatory conditions.

  1. Upgrade to smarter, more flexible decisioning technology

To seamlessly transition and comply with new regulations, you need an agile technology foundation that can process high volumes of data in real-time. Find an end-to-end decisioning solution that automates your credit risk assessment across the customer lifecycle while helping to drive customer retention and loyalty with AI-driven insights. Access powerful analytics for decision insights and a rules engine for deep customization that you can execute in real time.

Embracing Sustainable BNPL

Navigating the future of Buy Now, Pay Later can feel like a daunting task, even when you know the steps to take. So don’t do it alone – find a technology partner who has your back, from establishing a robust credit risk decisioning technology base, to  launching stronger risk mitigation strategies and, of course, adapting to new regulations. 

Embrace sustainable BNPL with Provenir.

Latest Resources

Customer Management

Navigating the Economic Landscape: Maximizing Customer Value in Financial Services

How the right holistic risk decisioning platform enables profitability across the lifecycle It’s more critical than ever to ...

What is Banking as a Service (BaaS): Exploring BaaS Trends in 2023

In the rapidly evolving landscape of finance and technology, new paradigms are constantly reshaping traditional banking models. One ...

Meet us at Money 20/20 in Las Vegas!

Date: October 22 - 25 Provenir is excited to be at fintech's biggest event this October in Las ...