The top U.S. customer finance regulator has warned that the dangers of “buy now, pay later” lending businesses are undermining competition in the fledgling industry and has questioned their buyers’ perception of risk. After Apple chose to launch its personal BNPL (Buy Now Pay Later) service, Rohit Chopra, director of the Bureau of Customer Monetary Security, warned Silicon Valley that his company should be very cautious about launching a review.
Chopra mentioned in an interview that among the many questions the company will consider is whether it has actually reduced the number of competitors and innovations from outside.
In response to questions about Apple’s launch, Chopra cited the many questions raised by large technology companies entering the short-term credit space – including how the companies will leverage buyers’ knowledge of risk.
Last month, the iPhone maker became the large tech company to launch a BNPL product in the U.S. and is currently the only one. Apple Pay then allows customers of its devices to make payments in four installments over a six-week period – without incurring any interest or fees. The service is available at online or brick-and-mortar retailers that partner with MasterCard Community’s Apple Pay.
After partnering with Goldman Sachs and MasterCard to launch bank cards for U.S. consumers such as Apple Card, the Silicon Valley company is emerging as another driving force for the currency company. Yet in contrast to earlier mortgage companies that offered with banking partners, Apple will take on and finance short-term loans.
Chopra mentioned that the entry of large technology companies into BNPL raises the question of whether different players in the game can compete and whether retailers can choose whether to offer installment plans.
Chopra said, “Big tech’s enthusiasm for ‘spend first, pay later’ is inextricably linked to its desire to dominate digital pockets.”
In October, the CFPB ordered Amazon, Apple, Facebook, Google, PayPal and Squre to disclose details of their fee plans and how the companies acquire and use buyer knowledge.
“Any tech giant with significant management rights to mobile work systems may be uniquely positioned to leverage knowledge and e-commerce more broadly,” Chopra said.
Companies with cellular working programs or charge networks via pre-installed apps will continue to tap into monetary companies to achieve greater insight into customer habits.
Chopra warned that the U.S. habit of separating banking and commerce will become darker as large-scale technology moves in the direction of financial companies.
