Sponsored Post: Damian Kassabgi: Our “buy now, pay later” option must not be bogged down by bureaucracy

9 Sep

Damian Kassabgi is the Executive Vice President for Public Policy at Clearpay.

If you have opened a newspaper over the last 18 months, you will have very likely read about the rise of “buy now, pay later” (BNPL) in the UK. Much has been said about the industry, which accelerated rapidly during the pandemic as e-commerce boomed during lockdown. Not all of it is accurate.

Conservative MPs have taken notice of the rise in the sector – many in support of the benefits it brings to the economy and our Fintech sector – while some have raised legitimate concerns about what it could mean for consumers – particularly for young people during the pandemic. Yet Clearpay came into being to modernise the personal finance industry and to support customers by solving the issue of problem debt, not facilitating it.

Clearpay was founded on a very simple concept. In 2013, our founders, Nick Molnar and Anthony Eisen, observed that millennials were wary of using credit cards after the global financial crisis and instead wanted a different way to pay without incurring interest. They therefore set up a payments platform that allows consumers to pay for items in four parts, in two-week intervals, with a fee taken from the merchant – not the consumer.

Clearpay will never charge interest, ever. If a consumer misses a payment, we charge a small late fee to encourage positive payment behaviour, but this is not designed to cover any losses. If a consumer is unable to pay, we never enforce the debt, or sell it on to debt collectors, nor do we impact their credit history. They simply cannot use the platform again until they have cleared their debt. Therefore, they cannot build up or revolve in debt with Clearpay. Thankfully we are talking about a very small minority here; 94 per cent of our customers pay on time.

The mission is to empower people and help them to take control of their finances by offering a product that enables responsible spending and is debt averse, flexible and easy to understand.

Compare this business model to credit cards. The credit card industry needs consumers to revolve in debt, encouraging minimum repayments and charging high interest rates. Sometimes people have to make a purchase that their monthly pay cheque can’t stretch to. In this instance, what would be a better option? A credit card that risks high interest repayments and revolving in debt, or paying it off in four quick and clear instalments at zero per cent interest?

The growth of BNPL has understandably led to calls for regulation. Clearpay agrees that “buy now, pay later” should fall within the remit of the Financial Conduct Authority in line with the recommendations of the Woolard Review. We were encouraged to see that many of the consumer protections we already have in place were recommended as best practice in the review and we remain committed to being an industry leader.

The next step is for the Treasury to publish its consultation which is expected imminently. We look forward to reviewing its content and will cooperate fully with the Government, Opposition, and the regulator to develop a fit for purpose regulatory framework that is in the best interests of the consumer. We hope that by working together, we can create a right touch regulation, not light touch regulation.

One such danger in the forthcoming consultation is falling into the misguided trap of thinking that introducing credit checks will solve the problem of young people abusing BNPL. This demonstrates a lack of understanding of how BNPL works. Credit scores have never been a reliable source for Clearpay, both because consumers are dealing with a budgeting platform, not a traditional credit provider, and the fact that so many young consumers have not built up a credit score at all. With an average transaction value of £65 on our platform, impacting a customer’s credit score for the price of a pair of jeans is disproportionate given the potential impact on their ability to access a loan for a house or car in the future. The traditional credit information market is designed for businesses, not consumers, and we endorse an approach to affordability checking that provides a more holistic and real-time view of a customer’s financial health, such as Open Banking.

Central to developing this right touch framework is ensuring that the user and merchant experience does not become bogged down by bureaucracy. Payment platforms like Clearpay play a key role in unlocking consumer demand in the economy, supporting businesses large and small right across the UK. The rapid growth in consumer adoption of BNPL demonstrates that we understand how consumers, especially young people, prefer to shop and pay in the modern world – and this is the future. Ensuring that we do not stifle innovation, while legislating for robust consumer protections, is the crux of what policymakers should be looking to achieve.

Damian Green: Here are our One Nation ideas for reviving post-Covid, post-Brexit Britain

27 Jul

Damian Green is Chair of the One Nation Caucus, a former First Secretary of State and is MP for Ashford.

There has been a flurry of comments about One Nation Conservatism, and what it means in the 2020s, over recent weeks. This is very timely, as for many years the One Nation tradition was linked with pro-European views, to the point where views on Europe seemed to become its defining characteristic.

Those times are clearly past, and one of the aims of the One Nation Caucus of Conservative MPs is to set out a new set of policy priorities, both in domestic and international policy, which we want the Government to adopt. We hope that we are pushing at a reasonably open door, as the Prime Minister has always described himself as a One Nation politician, and certainly his levelling up agenda is absolutely in that tradition. His description of himself as a “Brexity Hezza” may have been rejected by, well…..Hezza, but nothing is easy these days.

Getting the country back on the track it voted for last December is the task for the next four years, and One Nation ideas will play a central role in the successful pursuit of that project. The last thing the Conservative Party or the country needs is a continuation of the Brexit divisions. If the only thing that matters is how you voted in 2016, we will never move on. So through the summer and autumn the One Nation Caucus will be publishing a series of policy papers designed to set out a full agenda for government in the post-Covid period.

The first of these papers is Restarting the Economy, which brings together six MPs from various intakes to address the central issue of our times. Stephen Hammond is the lead author, and he emphasises the importance of a relentless focus on levelling up to extend growth beyond London.

Key proposals in the paper include the development of new local economic bodies to drive growth, expanding the number of planned freeports, and creating technology adoption funds to support the Fourth Industrial Revolution. The report also suggests a number of policies to protect people on low incomes, including suggestions for ending consumer rip-offs, and proposals for managing repayments of Covid business loans, recommending an approach similar to the Student Loan scheme.

Each of these is a meaty idea in its own right, and the full paper is available on the One Nation website. But this array of economic ideas is only the start of the wider project to position Conservative ideas at the heart of the national political debate post-Covid.

Labour may be under new management but one of the features of the Starmer era so far has been the avoidance of any policy discussions. This is clearly a conscious tactic, but while Labour pursues it there is a space to fill in shaping the public mind. It is often observed that intellectual regeneration is more difficult inside a governing party, but it is not impossible, and is absolutely necessary if conservatism is to have another successful decade.

The financial crisis, Brexit, and Covid-19 have been three black swans that have swept aside the original plans developed the last time the Conservative Party was in opposition. They have incidentally also swept aside Tony Blair’s fond idea of making the twenty-first century “the progressive century”, by which he meant the New Labour century. How does that look in 2020?

So now is exactly the right time for One Nation Conservatives to think hard and set up debates. After the economic paper our next publication will be on social mobility, how we can bring it back, and why we must not think about it in traditional terms. Following that we will be publishing a paper on the environment, showing how capitalism is not the enemy of achieving carbon New Zero, but the only way of reaching it.

Future papers will look at Britain’s place in the world, covering trade and aid, and specifically what the new configuration of the Foreign Office and DfId offers in the realm of making our aid spending (which One Nation Conservatives strongly support) more effective in the future. We will also be taking a hard look at schools and what they can do better to spread opportunity, and at the new world of work.

It is very pleasing that all cohorts of the Parliamentary party have contributed to these papers. Former Ministers have worked with many members of the 2019 intake on the individual ideas, proving that there is no shortage of new thinking on the back benches, and that One Nation ideas are alive and well in the rising generations within the party.

Whether or not you think of yourself as a One Nation Conservative, I hope you will welcome the fact that those of us who are in that tradition want to contribute publicly to the key debates that will dominate the coming decade. The public will of course judge the Government mainly on its actions. But every political party needs to demonstrate that it can apply its principles to new circumstances. In a world that changes as fast as this one constant intellectual regeneration should be our goal. The One Nation recovery papers are a contribution to that.