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The Buy Now Pay Later (BNPL) industry has witnessed exponential growth in recent years, offering consumers a convenient alternative to traditional credit cards. However, as this sector continues to evolve, it has caught the attention of financial regulators worldwide. A significant aspect contributing to this scrutiny is the increasing use of AI-powered surveillance within the BNPL industry. In this article, we will delve into the rising concerns regulators share in three key areas: high-interest rates, late fees, and financial stress on consumers. Additionally, we will explore the growing unease regarding AI data harvesting and digital surveillance of consumer data, which extends beyond retailers and impacts the relationship between retailers and consumers.


Escalating Interest Rates and Late Payment Fees

One of the primary concerns in the BNPL industry is the interest rates charged to consumers. While BNPL services advertise zero or low-interest rates, some consumers pay considerably more than initially bargained for. This is often due to late fees and the compounding nature of some BNPL plans. Regulators are increasingly focused on ensuring consumers fully understand the terms and potential costs of BNPL options.


Growing Financial Stress on Consumers

BNPL services have gained popularity by offering seemingly easy and affordable payment plans. However, for some consumers, these plans can lead to financial stress. The allure of purchasing without immediate payment can mask the potential long-term economic consequences. Regulators are concerned about consumers taking on more debt than they can handle, which could lead to financial instability.


AI Data Harvesting and Digital Surveillance.

AI-powered surveillance in the BNPL industry extends beyond managing interest rates, late fees and account management. It involves collecting and analysing vast amounts of consumer data, including spending habits, preferences, and even social media activity. While this data can be used to tailor marketing efforts and improve user experiences, regulators worry about the extent of data harvesting and the potential for misuse. Consumers must often be aware of the depth of data collection behind the scenes.


Retailer Concerns

Away from the consumer perspective, retailers are facing a unique challenge from the BNPL industry. BNPL providers often promote other brands’ merchandise directly to consumers during checkout. While this cross-promotion can benefit consumers by offering additional options, it can devastate a retailer’s customer loyalty and lifetime value. Retailers are concerned that the relationship they have carefully cultivated with their customers is being hijacked by BNPL services promoting competitors. Retailers (merchants) should ensure that their valuable customer data is only processed for so much to improve their customer relationship and experience. This can be achieved with a rigid Data Processing Agreement.


In Conclusion,

The growing use of AI-powered surveillance within the BNPL industry is drawing the attention of financial regulators globally. Concerns about high-interest rates, late fees, and consumer financial stress are paramount. Additionally, the extensive data harvesting and digital surveillance of consumer data, coupled with the impact on retailers, are areas of increasing scrutiny. As the BNPL industry evolves, balancing convenience and consumer protection remains a top priority for regulators and stakeholders. Understanding and addressing these concerns is essential for the sustainable growth and integrity of the BNPL sector.