Affirm Calls for an End to Late, Hidden Fees in BNPL

The buy now, pay later (BNPL) industry needs regulations to provide more standards for a booming market, the head of the BNPL lender Affirm said this week.

In an interview with the Financial Times on Wednesday (Nov. 24), Affirm’s Founder and CEO Max Levchin said he would support regulations to improve transparency and get rid of “hidden” charges like transaction or late payment fees.

Levchin said these regulatory measures would take an industry that is a “wild west” in some areas and bring it into the mainstream. “I don’t think it’s great for consumers to use one of those products and say ‘oh, so I tried this BNPL thing, I thought it was 0%, but it wasn’t because I got this origination fee,’” Levchin told the FT.

Read more: How Buy Now, Pay Later Is Revitalizing Retail and the Economy

BNPL use bloomed during the pandemic, as PYMNTS reported earlier this month. A recent Accenture report showed that consumer spending using BNPL grew by 230% since the start of 2020. Another study found that an estimated 29 million consumers — 11% of the U.S. adult population — have used BNPL in the last year.

In addition, around 43% of the adult population — 111 million consumers — say they are interested in using BNPL for big-ticket services such as travel, renovations or medical costs. Eighty-three percent of those consumers say it’s a practical alternative to using a credit card or taking out a personal loan.

Read more: Affirm President Says Consumers Turn to BNPL for More Flexibility and Transparency

As the FT notes, the growth in BNPL has allowed Affirm to enjoy triple-digit growth on their balance sheets at a time when many traditional lenders are struggling to attract new borrowers.

Levchin said he thinks BNPL would continue to grow, partially because it was a new payment used in just a handful of transactions.

“If, five years from now, we are not the leader in our space and we no longer have the advantage, we’ll get displaced. Then shed a small tear for us and move on,” he said. “But if we continue getting better, I don’t think we have too much to worry about.”