Yaacov Martin, CEO of Jifiti, was interviewed by American Banker about the Consumer Financial Protection Bureau’s (CFPB) new interpretive rule for the BNPL industry – and what it will mean for banks, lenders, fintechs and the industry as a whole.
Consumer protection obligations that have been included in consumer protection acts, such as the Truth in Lending Act (on which the CFPB’s interpretive rule is based) are quite extensive. Entities need to have the relevant knowledge, services, a trained team and processes in place, which is not an overnight nor low-cost endeavor.
The controls that are put in place to secure full consumer protection involves overhead and investment. BNPL fintechs will need to figure out how to compete with banks, as higher overheads will put them at a competitive disadvantage.
Having said that, we can expect to see the natural selection process occur in the BNPL industry, and the industry will consolidate. Over time, the leading BNPL fintech companies will be able to live up to those standards, however banks and financial institutions are already compliant, making them well-positioned to dominate the market. Ultimately, it will be banks and a select few fintechs that are going to be able to comply.
The playing field has already been leveling in the BNPL market due to macro-economic influences and interest rate hikes, and the CFPB rule will now further shift the market in favor of banks and regulated lenders. This is another fundamental reason why banks that are hesitating need to get off the fence and into the market while it is ripe for them.
Find out more about the impact of CFPB and the industry’s response to it in American Banker.
