India needs to regulate “buy now, pay later” products like it does consumer loans, said Mel Gerard Carvill, non-executive director of Home Credit NV.
There is also a need for common regulation of all consumer credit providers so that everyone is regulated on an equal footing, Carvill said. Activity area here in an interview.
Carvill, who is a member of the board of directors of this non-banking international financial institution headquartered in the Netherlands, pointed out that many fintechs are still unregulated and that they must be regulated in order for trust to remain in the financial system.
Short-term financing
BNPL, which has seen explosive growth in India in recent years, is like short-term finance that allows consumers to make purchases and pay for them in the future, often without interest. It has become a popular payment option, especially in online shopping. It is also commonly referred to as a point-of-sale installment loan.
Carvill, who is visiting India, pointed out that many parts of the world are now subjecting BNPL to regulation because consumers need to be protected.
“The thing about BNPL is that no interest is charged to the client. There is interest but paid by the retailer. It is not regulated because there is no interest for the consumer. Usually, in most countries, lending is regulated when there are interest charges, but not when there are no interest charges to the consumer. The problem is that there has been an explosive growth of the BNPL and the people taking it are young people. You have repayment obligations. It needs to be regulated the same way lending is regulated,” he added.
To support his point on BNPL, Carvill cited the Woolard review commissioned by the board of the UK’s Financial Conduct Authority (FCA) of the unsecured credit market and pointed out that this review argued in favor urgent regulation of all BNPL products. While the emergence of unregulated BNPL products has provided a significant alternative to payday loans and other forms of credit, BNPL also represents significant potential harm to consumers, according to the Woolard study.
Global Topics in Consumer Credit
Highlighting key global consumer credit themes, he said technology and regulation are the main ones.
“The growth of technology is the major theme and it has transformed the business. It has also transformed the business offering and brought in new operators. Traditionally, consumer credit has been provided by banks and non-banks, but we are now seeing an explosion in the growth of BNPL, payday lenders and fintechs.All of this has created a response from the authorities which is a global mega theme – regulation. Consumer finance have long been regulated both in terms of prudential soundness and market conduct (how they treat customers). However, many fintechs remain unregulated. Countries around the world are slowly seeking to regulate them.” , he added.
The majority of BNPL startups operating in the Indian market have seen growth over the past year. BNPL platforms are also raising funds to expand in the growing market.
India’s very exciting market
Home Credit, which entered India in 2012, sees the country as a “very exciting market” and has “ambitious aspirations” for it in the coming years, Carvill said.
“Everyone has the rise of India on their list. It is a very exciting market and it will be very difficult as a multinational not to enter the Indian market. Everyone is optimistic about India’s future and you have to be here if you want to succeed as a multinational. We have ambitious aspirations despite difficult years due to Covid-19. We have consolidated and transformed into a technology-driven player in India,” he said.
Home Credit India’s digital channel, which accounted for just 2% of its overall business in 2018, has now grown to 35%. In India, this consumer credit provider has 2 million monthly active users on its app.
Published on
May 03, 2022
