Banks critical of buy now pay later ‘rules’

ANZ chief Shayne Elliott has accused the buy now, pay later industry of regulatory arbitrarge.

ANZ chief executive Shayne Elliott working from his Melbourne home.

The pile-on by the major banks against some buy now, pay later players over their lack of regulation has continued, with ANZ Bank chief executive Shayne Elliott accusing them of “regulatory arbitrage”.

Asked in a parliamentary hearing on Friday what he thought about regulation of the BNPL sector, Mr Elliott facetiously responded that he “wasn’t aware there was any”.

He then said BNPL providers had engaged in regulatory arbitrage and now it was time to “play with the rest of the market and do so under full regulation”.

“Regulation is supposed to be designed to do two things,” the ANZ chief said.

“One is to protect prudential soundness of the system and look after depositors, but also to protect the interest of customers, but I don’t think because of the label I put on something it really should be treated differently by regulation.

“I look at it and think what they are doing is extending credit, and I think therefore they should be subject to exactly the same rules as everybody else.”

Mr Elliott, who said he didn’t come to the hearing to “beat up on” the industry, has previously played down the immediate threat posed by BNPL players, saying last October that Afterpay’s 3.5 million customers in Australia were generally not high savers motivated to buy their own homes. While that could change, it was certainly the case at the moment.

ANZ data, which picks up customer payments to BNPL operators, showed that such customers were younger and riskier.

They were also twice as likely to fall behind in their repayments to the bank, and generally did not have a credit card or a personal loan.

Mr Elliott’s comments to the House economics committee on Friday chimed with those of Commonwealth Bank chief executive Matt Comyn the day before.

Mr Comyn noted that the level of consumer spending in the sector was “clearly significant” at $10bn.

“We’re not talking here about a couple of small start-up companies that are unfunded,” he said. “We’re talking about an ASX 20 company (Afterpay) or, put another way, they were recently about 85 per cent of the market capitalisation of Macquarie Bank.”

Hardship rates, he said, were double in the BNPL sector, which also had higher arrears rates, and it was important for CBA to act responsibly even if there was a legislation loophole.

“I would suggest the line around innovation at the moment is skewed to a complete absence and lack of regulation in a number of areas related to credit product and facilities, comprehensive credit reporting, the consumer data right, and facilitating competition and rights for merchants to pass on higher input costs to consumers as they are able to do for other debit and credit products,” Mr Comyn said.

CBA is the biggest BNPL player among the major banks.