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Afterpay (ASX:APT) share price on watch after UK BNPL review

The Afterpay Ltd (ASX: APT) share price is on watch today after the release of the Woolard review about the BNPL industry in the UK.

What happened?

Afterpay handed in an announcement after the release of the Woolard Review in the UK and the report’s proposal to bring the buy now, pay later (BNPL) industry under FCA (Financial Conduct Authority) oversight with proportionate regulation.

Clearpay, the name of Afterpay’s UK subsidiary, pointed out that the report acknowledged the varied nature of the market and acknowledged that the BNPL industry needs proportionate regulation to protect consumers going forward.

The BNPL business said that it has always supported fit for purpose regulation that recognises the diversity of the industry and desire from consumers for flexible payment options that don’t trap them in long term debt.

Clearpay claimed in the announcement that its inbuilt protections produce superior consumer outcomes compared with traditional credit products using legacy credit checks that punish consumers and result in higher interest charges.

The UK BNPL operator said that the product requires a 25% payment up front, starts with low initial consumer spending limits that only increase with positive payment behaviour, includes a cap on late fees, has no interest charges and freezes accounts if a payment is not made on time.

Clearpay has more than 1.2 million consumers using the service in the UK.

Clearpay comment

Damian Kassabgi, Clearpay EVP of Public Policy, said: “We welcome today’s recommendations and look forward to working with the FCA, the government and stakeholders to build on the consumer protections we already provide to create the applicable regulation for the sector.

It has always been Clearpay’s view that consumers will be best served by products designed with strong safeguards and appropriate industry regulation with oversight from the FCA.

We are pleased that many of the suggestions we put forward in our submission to the Woolard review have been acknowledged and that the review has recognised the diverse nature of the industry.”

Summary thoughts

I’m not sure how much this will affect the profit or growth of Clearpay in the future, but it sounds like it’s going to be a good change for consumers, which is the most important thing.

Afterpay is certainly generating a huge amount of sales growth and market share growth of the overall spending of Western consumers.

Is Afterpay wildly overvalued or could the share price jump to $200 this year? I’m not sure either way. There are other ASX growth shares in the payments space I’d much rather invest in like Pushpay Holdings Ltd (ASX: PPH).

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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