Could increased BNPL regulation be a positive for Zip shares?

The buy now, pay later stock is in the spotlight as increased federal regulation of the sector looks increasingly likely.

| More on:
person sitting at outdoor table looking at mobile phone and credit card.

Image Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Zip shares are in the green in morning trade
  • Federal regulations similar to those applicable to credit card companies will potentially be applied to BNPL providers
  • Zip supports the move saying “the industry is ready for regulation”

Zip Co Ltd (ASX: ZIP) shares kicked off the week in positive territory, closing up 1.3% on Monday at 78 cents per share.

The buy now, pay later (BNPL) stock posted those gains on the day federal regulators indicated Zip shares and other stocks in the BNPL sector were likely to face similar regulations to credit card companies.

Currently, BNPL companies aren't held to the same regulatory standards as credit card providers in ensuring their customers are unlikely to face difficulties in making their repayments.

But on Monday finance minister Katy Gallagher flagged likely changes ahead.

"People are starting to see it as a credit card," she said. "It's responsible to have a look at how it is regulated and how people are using it, what some of the problems are and how to provide that protection to people."

Could increased BNPL regulation be a positive for Zip shares?

While Zip shares closed higher on Monday, they dropped 3.9% on Tuesday and fell 4% on Wednesday. In early morning trade today, the Zip share price is up 3.5%.

That's a bit of a mixed picture regarding the outlook for Zip shares amid tighter potential regulation of BNPL companies.

However, Zip's ANZ head Cynthia Scott was upbeat about the government's plans.

"We firmly believe the buy now, pay later industry is ready for regulation," she said. "We have been working with Treasury on options for some time and endorse any changes that give consumers greater confidence when using BNPL products."

Scott said Zip, whose shares began trading in December 2009, operates "above the minimum standard".

According to Scott:

Right from the beginning, we have held an Australian Credit Licence (ACL) and conducted credit and affordability tests on our customers in Australia. As a result we have very few customers in arrears or hardship…

The industry continues to grow very rapidly and regulation is vital as it matures. It is important that appropriate guardrails are in place to ensure consumers are protected.

How has Zip stock been tracking longer-term?

Zip shares, along with every BNPL stock we're aware of, have taken a beating over the past year as investors began to price in the impacts of fast-rising interest rates.

That's left the Zip share price down 85% over the past 12 months. For some context, the All Ordinaries Index (ASX: XAO) is down 4% over the full year.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on BNPL shares

A man looking at his laptop and thinking.
BNPL shares

Down 6% in a week, should you buy the dip on Zip shares?

Where to next for the BNPL player?

Read more »

A businessman stacks building blocks.
Technology Shares

Why is the Block share price rocketing 10% today?

Brokers continue to be bullish.

Read more »

A happy girl in a yellow playsuit with a zip gives the thumbs up
BNPL shares

Is this why the Zip share price keeps breaking records?

Zip shareholders have been enjoying a record breaking year. Is this why?

Read more »

A cool dude looks back at the camera while ziplining above the treetops.
BNPL shares

Why is the Zip share price on a rollercoaster today?

Zip shares are now up an eye-watering 670% in a year.

Read more »

Man holding out $50 and $100 notes in his hands, symbolising ex dividend.
BNPL shares

Owners of Zip shares are projected to start receiving dividends in the next few years

An expert is forecasting that passive income could start flowing.

Read more »

woman using affirm to pay
BNPL shares

Are Zip shares a buy following the ASX 200 stock's bumper quarter?

This stock continues to impress.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
BNPL shares

Why is the Zip share price jumping 10% today?

Let's see what is getting investors excited about this buy now pay later provider today.

Read more »

A happy girl in a yellow playsuit with a zip gives the thumbs up
BNPL shares

Here is the earnings forecast out to 2029 for Zip shares

How much could Zip’s earnings grow in the next few years?

Read more »