Preparing For New Regulation Of Buy Now Pay Later

Recent figures on the use of BNPL deals indicated that £1 in every £7 spent with online retailers in the first quarter of 2024 was with a BNPL option. In total in 2023, £16.7bn was spent online via BNPL firms. This is unsurprising given the financial challenges consumers are currently facing, where spreading the cost of purchases is not just the most attractive but, in many cases, the only option they can take. 

However, consumers are increasingly struggling with repayments, with 22% defaulting on BNPL payments in the last six months of 2023. And with the FCA and Government keeping a close eye on the sector, and the firms they partner with keen to keep customer loyalty, BNPL firms recognise the need to treat consumers in line with industry best practice.

Regulatory obligations and best practice

Full FCA regulation of the BNPL sector has been mooted for a while now and the new Labour  government has made it one of their pledges to bring this into effect. In addition, the FCA has in the past acted under the Consumer Rights Act against firms they feel are not treating customers appropriately, such as not clearly communicating the impact of BNPL debt to the consumer.

Realistically, BNPL firms are fully expecting and preparing for increased regulation, and many see how it can support their businesses in a highly competitive marketplace. In particular, the Consumer Duty will be a key influence on business operations as an indicator of excellent customer service and a commitment to delivering positive customer outcomes.

Complaint handling and engagement with vulnerable customers who are struggling with their repayment plans form two of the main pillars of the Consumer Duty for BNPL firms. Ensuring any complaints are dealt with in a way that is transparent and consistent, and does not cause harm to the consumer, or the reputation of the BNPL firm and their retail partner, is important for ongoing business credibility. Taking this direct input and feedback from consumers and using it to shape future products, services, and communications is key to Consumer Duty compliance.

Many BNPL firms have already adopted customer service approaches that echo official regulatory best practice, particularly around managing customers who default on their agreements. However, with the volume of both users and arrears increasing, and with it just a matter of time before full regulation is imposed, now is the time to take the next step in ensuring an effective and flexible customer service and complaints handling function.

Delivering the best customer outcomes under the Consumer Duty

There are some key components to consider when reviewing the effectiveness of complaints handling and customer service operations in delivering the best outcomes for consumers.

Using data – Undertaking root cause analysis has long been a part of good business practice and operations, but the whole exercise is pointless if the data is not acted upon to improve operations for both consumers and the business itself.
Thorough data analysis and root cause driven action plans not only evidence compliance with the Consumer Duty but can prevent complaints and identify areas for operational improvement that helps reduce costs and increase effectiveness.
By focussing on delivering positive customer resolutions and acting for not just the customer who has complained, but also for the many who have not but are likely experiencing the same problem, businesses can benefit themselves as well as the consumer.

Automation – As companies adapt to the changing regulatory landscape brought about by the Consumer Duty, the importance of an effective complaints management approach cannot be overstated. Specialised systems not only facilitate efficient complaint handling, but also provide data-driven insights, enhance transparency, and contribute to an improved customer experience.

By embracing these systems, businesses can not only meet their legal obligations under the Consumer Duty, but also differentiate themselves in the market through a commitment to fair treatment, transparency, and customer satisfaction.

In addition, they provide vital support for front line staff who are under increasing pressure to deliver positive outcomes to an increasingly complex customer base. By providing a consistent framework and automating simple, repetitive manual tasks, such a system can free up staff to delivery higher value customer service. 

Flexible workforces – Customer-facing staff are being asked to take on more responsibility than ever before, not just for resolving a customer’s query or complaint, but also to play a proactive role in identifying and responding appropriately to any indication of vulnerability by the customer.

The pressure of this job often results in high turnover in staffing which can impact both the quality and availability of the service provided to customers. Combine this with the fluctuations in demand for customer contact that most businesses experience and balancing staffing levels with demand while maintaining a high-quality service is a real challenge.

This is where we see the adoption of flexible and contract resource as a welcome solution. Highly trained and pre-vetted, these individuals can support permanent staff with peaks in demand, including for past business reviews and specialist project work, in addition to filling skills and capacity gaps.