Aftershocks

21 October 2019 By Clara Ferreira Marques

Like other hot startups, $5 bln buy-now-pay-later outfit Afterpay operates in a grey area. Because it is not covered by credit rules, customers borrow for free. Success is inviting scrutiny; regulatory concerns have just erased over 20% of its value. The harder part has begun.

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The Reserve Bank of Australia said on Oct. 17 that its planned assessment of card payments regulation in 2020 would consider the growth of buy-now-pay-later services. The review will include deciding whether policy action is needed to tackle “no surcharge” rules imposed by such providers, which prevent merchants from passing costs on to customers. The comments were made in the RBA’s Payments System Board annual report.

Afterpay Touch, a consumer payment outfit, said on Oct. 21 that it is not currently part of an RBA inquiry, but welcomed the opportunity to engage with the central bank’s periodic review next year.

The company is not subject to consumer credit laws in Australia because it does not charge interest. The service is free for consumers who pay on time.

Afterpay shares hit a record price of A$37.40 on Oct. 15, but they have fallen by more than a fifth since. The stock was trading at A$28.84 in morning trading in Sydney on Oct. 21.

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