The Afterpay Ltd (ASX: APT) share price has dropped 3.06% today as its chief executive faces a Senate committee.
The Senate committee on financial and regulatory technology is charged with examining ASIC's competition mandate and opportunities to strengthen compliance.
ASIC is considering calling on the Government to extend the national credit code to buy-now-pay-later (BNPL) providers such as Afterpay, with a report due in the next couple of months.
Afterpay has argued that it should not be subject to the code as it doesn't charge customers unless they make late repayments, levying fees on retailers instead.
Afterpay argues that it should be treated differently from credit providers that are subject to the code as it only allows customers to spend a small amount initially and requires them to be up to date on repayments to continue using the service.
Were Afterpay to become subject to the code, it would slow on-boarding of new customers as their financial position would have to be verified to allow them to use the service.
Afterpay CEO faces Senate committee
As reported in the Australian Financial Review (AFR), Afterpay CEO Anthony Eisen told the committee, "what we have been talking about is not to skirt anything in terms of responsibility. It is about having regulation that is fit for purpose for what we do."
Admittedly, the national credit code was not written with BNPL providers in mind. However, their proliferation over the past several years has left regulators struggling to oversee the sector.
Afterpay and its ilk have now expanded offshore, with Afterpay expected to show strong growth in merchant and customer numbers in the UK and US when it reports its first-half results next week.
However, Eisen has told the Senate committee the company's growth has been hindered by uncertainty around its regulation.
As reported in the AFR, Eisen told the committee, "as a whole it has been very difficult for us to expand the way we have expanded, because sometimes, even though it is not the intention, the messages come around about regulatory uncertainty, and how we are viewed in our home market in Australia has really serious ramifications overseas."
Zip co-founder echoes Eisen's sentiment
Yesterday, Zip Co Ltd (ASX: Z1P) co-founder Peter Gray told the committee that too many regulators were overseeing the BNPL sector.
"[we] operate in a variety of regulatory landscapes and are faced with a myriad of current and potential regulation from different regulators that do not speak to the technology or products we've created," the AFR reported him saying.
Gray went on to add, "We are currently regulated or overseen by ASIC, the ACC, AFCA, AUSTRAC, the OAIC, APRA, Treasury, and the ASX – and now, in addition, the RBA is making moves."
Acknowledging the pace of change, Gray called on regulators to work with fintechs to ensure technology and regulation work together.
