High delinquency rates reported by buy now pay later providers should be monitored by financial regulators and policymakers for any negative impact on the rest of the financial system, a new report on the sector argues. A cross-country analysis of BNPL by the Bank for International Settlements also called on authorities to look at whether BNPL schemes take advantage of financially constrained consumers through misleading promotions and inadequate information. In all markets surveyed, the BIS found that BNPL users tend to have riskier credit profiles than those using traditional consumer credit products. Late payments and losses for BNPL in the United States, where users have below-average incomes and below-average education attainment, are higher than for credit cards. The majority of users across all countries are under age 35 and have relatively low levels of financial literacy. In the US, BNPL users are more highly indebted and have lower credit scores than non-users. Most schemes are accessible by consumers without a credit history or stable income. BNPL providers usually apply “soft” credit checks, which are less intrusive than the “hard” checks done by credit card issuers and banks. Late payments are often not recorded on a credit file, although severe delinquencies usually are. BNPL activity, measured as gross merchandise volume processed through BNPL schemes, increased more than six-fold globally between 2019 and 2023. The countries with the highest adoption rates are Australia and Sweden. Other countries with high adoption rates include China, Finland, Germany, the Netherlands, New Zealand, Norway Singapore, the United Kingdom and the United States. Merchants have been keen to offer BNPL, despite paying higher fees for access than for bank credit or credit cards. The report said BNPL is an unprofitable business model in all markets. Providers rely primarily on fee revenues. They have struggled to achieve profitability because of high operating costs and rising credit losses. Returns on assets have been consistently negative. Minister for Financial Services Stephen Jones announced in May that the government would regulate BNPL. Providers will have to hold Australian credit licences, comply with responsible lending obligations, meet dispute resolution and hardship requirements, and comply with product disclosure and other information obligations. Jones said the plan will bring BNPL into line with other regulated credit providers but simplify some requirements and address concerns about competitive neutrality. Responsible lending obligations on BNPL providers will be “scalable and technologically neutral”. The government is yet to produce the promised legislation.