The chief of the UK’s financial watchdog has questioned the legitimacy of concerns from buy now pay later (BNPL) firms after reports emerged of companies threatening to leave the country if strict regulation be enacted.
Nikhil Rathi, CEO of the Financial Conduct Authority (FCA), dismissed the warnings from BNPL firms on Wednesday. Speaking to MPs, Rathi said he did not “buy the argument” from those claiming regulation would force an exit.
This week, it was reported that the Treasury was considering scrapping plans to introduce stricter regulation for financial services that split the cost of purchases into several recurring payments.
The Treasury was said to have faced pressure from unnamed BNPL firms that claimed new regulation would lead to an exodus from the UK market.
Rathi, however, believes that the fintech sector is broadly in support of plans to regulate the alternative payment type.
“You will have firms saying to you ‘this will undermine the competitiveness of the UK market, it will undermine the fintech industry’ – actually a large number of fintechs including Innovate Finance, the industry body, have supported regulation,” Rathi said.
“We will make sure that there is proportionate regulation that supports innovation, but also encourages responsible lending.”
The FCA laid out its proposal for new BNPL regulation in February, which would see the product treated similarly to other credit-based loans. This would mean a requirement from firms to conduct robust affordability checks and report use of the service to credit agencies.
Several BNPL firms operating in the UK have come out in support of regulation, most notably Sweden’s Klarna, which urged the government to move quicker with the implementation of the new rules.