What Purchase Plans and Pay Advances Could Change in 2022

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How Pay and Purchase Advances Could Change in 2022
BNPL and payday advance companies are likely to be a target for competitors and regulators in 2022.
By Annie Millerbernd Lead Writer • personal loans, "buy now, pay later" loans, cash advance apps Annie Millerbernd is a NerdWallet authority on personal loans. Before joining NerdWallet in the year 2019, she worked as an investigative reporter for California and Texas as well as as a digital content specialist for USAA. Annie's work was praised by the press and was published in The Associated Press, USA Today and MarketWatch. Annie has also been quoted by New York magazine and was featured on NerdWallet's "Smart Money" podcast, in addition to local radio and television. She's located at Austin, Texas.





Dec 9, 2021


Editor: Kim Lowe Lead Assigning Editor The consumer lending Kim Lowe leads the personal loans editorial team. She came to NerdWallet in the last 15 years, after of managing content for MSN.com which included food, health and travel. She started her career as a journalist for publications covering mortgages as well as the restaurant, supermarket and mortgage industries. Kim earned her bachelor's degree in journalism at the University of Iowa and a Master of Business Administration from the University of Washington.







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It's been a big year for alternative financing options such as "buy now and make payments after" as well as cash advances apps.
Companies offer financing at check-out that allows customers to break up the cost of their purchase into multiple smaller payments. Paycheck advances can be arranged through apps or employers and let consumers have access to the expected income prior to the payday.
Both financing plans provide quick money for cash-strapped consumers, and both have gained popularity in recent years, particularly as the pandemic has thrown finances into chaos.
With their use increasing the regulators and competitors have noticed. These emerging financing options might change in 2022.
Banks create a BNPL presence
BNPL is expected to contribute 6% of all U.S. dollars spent online this year, according to a September study conducted by the consulting firm Accenture and ordered through BNPL company Afterpay. In 2025, the number is expected to rise to 13 percent.
At present the BNPL market is being dominated by apps such as Afterpay and Affirm, as well as certain credit card companies. In the near future large banks could offer BNPL options that they own, according to Ruby Walia, senior advisor to digital banking at digital consulting firm Mobiquity.
"Banks don't really want to give up business to fintech companies," he says. "If they can offer an own, bank-branded BNPL service to their customers, they'll at some point offer that."
Banks might offer co-branded BNPL service with retailers, similar to the co-branded credit cards some already use, he adds. They could also copy credit cards' take on BNPL and let customers split the debit card purchase into smaller ones after they have made the purchase.
Competition likely for popular paycheck advances
Business partners with companies like DailyPay to let workers dip into their expected earnings earlier. Consumers can also download an app like Earnin or Dave that analyzes your bank account and tracks your hours worked to determine what you're getting paid, and at what time it's possible to get part of that amount and repay it on your next payday.
A few of the nation's biggest employers -- Target, Walmart and Amazon including -- already offer .
In 2020, employees have used the service of a payday advance nearly 56 million times to get access to a total of $9.5 billion according to a research by the research and advisory firm Aite-Novarica Group. That's up from 37.2 million transactions that amounted to $6.3 billion in 2019.
If there's a need there's competition, it is inevitable. In the ever-changing financial technology industry, says Brian Tate, CEO and president of the Innovative Payments Association, which promotes the electronic payment sector. He says he welcomes newcomers.
"Where we are now is quite different from what we were five years ago or three years ago," the CEO says. "Our hopes are that there will be more competition, and more providers, and I believe that's good for the consumer."
The regulations are on the horizon
Lawmakers and regulators have considered the best rules for BNPL and pay advance companies in recent times. In November members of the House Committee on Financial Services held a hearing about emerging fintech companies to discuss the advantages and disadvantages of both types of financing.
Advocates for consumers say BNPL businesses and cash advance companies provide credit and should enjoy the same consumer protections as credit card issuers and personal loan lenders.
"Our belief has been for both of these products that these are loans. Someone has loaned you money, and you pay it back on an earlier date," says Rachel Gittleman Financial Services Outreach Manager with Consumer Federation of America, a consumer advocacy group.
However, advocates for the development of new financial products say that too many regulations could stifle the pace of innovation.
"No whatever product you're discussing These are brand new products," Tate says. "They're not the same as the products in concept that people may already be familiar with."
Paycheck advances may not have regulators' attention now, but they could in the coming years the expert says.
The Consumer Financial Protection Bureau issued an advisory opinion in the year 2020 that a few advances that are made through employers aren't credits under the Truth in Lending Act, which governs most types of credit offered to consumers. In the days following Rohit Chopra's confirmation earlier in the year to be the new CFPB director the consumer groups issued an email to the director asking him to reverse the advisory opinion.
How can you make these financing choices work?
A lack of regulations and a flood of new products means it's the responsibility of the customer to research the options, evaluate alternatives and make a plan before using a fresh financial service.
Here are a few tips to keep you on track when you try out the latest kind of finance:
Do your research. No two BNPL organizations or pay advance services will have the exact costs or terms, so make sure you read about the company's history to learn the advantages and disadvantages, advises an Illinois-based certified financial planner Maggie Klokkenga.
Make sure you know your . Whether you're adding one or two smaller installment loans or claiming a portion of your earnings early, it'll affect your budget. Knowing when you'll need to pay back and what will be there to pay at that time will assist you in avoiding the risk of overdrawing.
Monitor your use. The new services such as BNPL and pay advance can be used safely when you're anticipating the repayment. Keep track of how many BNPL services you utilize or the number of outstanding advances are available, to prevent missed payments and late fees.




About the author: Annie Millerbernd is a personal loans writer. Her work has been published in The Associated Press and USA Today.







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