On Breakingviews: Pay-later lending is reshaping how people buy online. Banks are scrambling to catch up with upstarts like Klarna and Affirm, while regulators fret about unsustainable debts. KarenKKwok and peter_tl explain why a reckoning is on its way
. PayPal last month bought Japan’s Paidy for $2.7 billion, securing a foothold in a country where many citizens still use cash.
Any rapidly growing financial product prompts complaints and concerns. Pay-later loans are no exception. Regulators have focused on what they see as inappropriate marketing of credit, particularly to younger consumers, and whether buyers can afford the loans they are taking on. Affordability checks are therefore urgent. The UK Financial Conduct Authority expects to introduce new rules next year. Reporting pay-later loans to credit bureaus is a first step. More drastic options would be to insist all pay-later providers obtain a banking licence, or to require retailers to seek regulatory approval before offering the loans.Companies like Affirm, Afterpay and Klarna have the advantage of being early movers.
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