The invisible risk

8 Dec 2020 By Karen Kwok Follow @KarenKKwok

Sweden’s Klarna and Australia’s Afterpay both allow punters to buy goods and defer payment. Opinion is divided over how regulators should treat any loss on the enabling financing. Balancing innovation and stability is hard, but the rules right now aren’t clear enough.

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Capital One Financial, the third-largest U.S. card firms, on Dec. 7 said it has barred customers using its credit cards to pay buy-now-pay-later debt. A spokeswoman of the firm told Reuters that “these kinds of transactions can be risky for customers and the banks that serve them”.

However, the CapOne spokeswoman said customers who paid for BNPL purchases with debit cards or checking accounts were not affected by the decision to stop credit card BNPL payments.

Afterpay, which operates in Australia and the United States, as well as Clearpay in the UK, said 90% of its BNPL debts were settled via debit rather than credit cards.

On the same day, Reserve Bank of Australia Governor Philip Lowe said the preliminary view indicates that BNPLs have not yet reached a point where the cost from the no-surcharge rule outweighs the potential benefits in terms of innovation.

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However, the CapOne spokeswoman said customers who paid for BNPL purchases with debit cards or checking accounts were not affected by the decision to stop credit card BNPL payments.

Afterpay, which operates in Australia and the United States, as well as Clearpay in the UK, said 90% of its BNPL debts were settled via debit rather than credit cards.

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