The Afterpay Ltd (ASX: APT) share price could come under pressure after the Commonwealth Bank of Australia (ASX: CBA) CEO recommended that buy now, pay later is regulated.
What did the CBA CEO say?
According to reporting by the Australian Financial Review, the CBA CEO Matt Comyn has said that the buy now, pay later industry is now so big that it should have regulation and users of those services are more risky than non-users. CBA recently announced its own BNPL service.
He argued that the buy now, pay later operators should be required to report to credit agencies so that the overall debt can be collectively seen.
The AFR also reported that he said that the consumer data right should be extended to payment providers.
The CBA CEO also argued the point that people who don’t use BNPL are subsidising those that do – the cost for merchants is about four times more than accepting a credit card. Merchants aren’t allowed (by the BNPL) to pass on those costs to customers.
CBA CEO quotes
Talking to the house economics committee, CBA CEO Mr Comyn said:
“I acknowledge the work and innovation undertaken to build such large and successful company – and avoiding all of that regulation is quite a feat.
“We see roughly buy now, pay later users having twice as much credit on their credit facilities, and typically on their credit cards [and] they have more credit products,” he said. “That is what we can see. But a number of buy now, pay later providers don’t contribute to ‘comprehensive credit reporting’.
I would suggest the line around innovation in this area is skewed to a complete absence and lack of regulation in a number of areas.
The government does and should have a posture towards new players to facilitate and encourage innovation, but my point is based on size and scale – they are beyond the point where the legislation framework that applies to that sector needs to be comprehensively reviewed.”
What does Afterpay say?
Of course, Afterpay says that it shouldn’t be regulated. The buy now, pay later company says that research shows its users apparently have less personal liabilities than the general population.
Afterpay also says that it provides advertising/customer acquisition services for companies by bringing in new business. It’s not just a payment business, it offers its app and website as a portal for marketing.
Summary thoughts about the Afterpay share price
CBA CEO Matt Comyn doesn’t decide the rules. However, he does have a significant voice in the financial world. I’m sure he is able to talk to certain politicians as well.
There is a fair chance that there could be more regulation coming down the track. The fact that merchants can’t pass on fees could be a big change if that was altered. Would customers keep using buy now, pay later if it was more expensive? I’d guess quite a few people wouldn’t.
With the Afterpay share price above $125, I don’t think the valuation factors in this potential risk. There are plenty of ASX growth shares I’d rather buy today.
