Risks have grown in parts – Newspaper Kommersant No. 9 (7454) dated 01/19/2023

While consumer lending struggled to recover to 2021 levels in 2022, installment loans saw a tenfold increase. Such high rates are primarily due to the low base, the market is just emerging. The popularity of the product is due to the fact that it is not a banking one; even a passport is not required for registration. However, the regulator is already actively interested in the market, including the aspect of debt collection.

The total volume of purchases made using the BNPL service (Buy now, pay later, “buy now, pay later”) “Shares” (owned by the Tinkoff Group) since its launch in April 2021 has exceeded 10 billion rubles. From January to December 2022, the monthly volume of purchases paid in installments through the bank’s service increased more than tenfold, Kommersant was told in a financial institution. The total turnover of BNPL in 2022 in Russia, other interlocutors of Kommersant on the market, is estimated at up to several tens of billions of rubles, also speaking of an increase by an order of magnitude compared to 2021. Back in August, experts believed that in general, by the end of 2022, the scale of installment plans in the Russian Federation would not exceed 8 billion rubles. (see Kommersant dated August 19, 2022).

BNPL is a service that makes it possible to divide the purchase payment into equal parts, while not paying interest, as in a traditional loan. In Russia, the BNPL service is offered by large banks – Tinkoff (Shares), Sberbank (Pay in installments), Alfa Bank (Share), as well as marketplaces – Yandex (Split), CFT ( PayStep, Ozon.

“The dynamics of the BNPL differs from the trends in stagnant consumer lending,” emphasizes the interlocutor in the financial market (see Kommersant of January 11). “All the phenomena of growth and decline in indicators here are due to the fact that new players entered the market and debugging of technologies took place,” Sberbank believes. Ozon, Yandex, CFT and FlexiPay declined to comment.

In fact, the installment service replaces POS lending, but taking into account the realities of online retail, says Maxim Nalyutin, head of the group for working with financial institutions at DRT. For comparison: in Kazakhstan, BNPL accounts for 20% of consumer lending, they add in Technology of Trust (formerly PwC in Russia). According to various estimates, by 2025 the global installment market will reach $350–400 billion, and by 2030 it may exceed $2–4 trillion, says Alexei Tarapovsky, founder of Anderida Financial Group.

Given that the service is an analogue of bank lending, the Central Bank already considers it necessary to regulate BNPL products. They talk about plans to bring together consumer credit legislation and legislation regulating installment services. In particular, introduce requirements for informing consumers and the content of the contract, limit the amount of the penalty for delay, and enable the buyer to prohibit the assignment of claims. The regulator believes that the buyer should have the opportunity during the “cooling off period” to refuse the installment plan along with the return of the goods.

Regulation would make it possible to ensure adequate risk weighting of such loans, as well as to establish uniform standards for working with them, experts say. “The lack of regulation can lead to a relatively large information asymmetry, when information about the properties of a loan product is not disclosed in accordance with the requirements applicable to standard consumer loans,” explains Valery Piven, head of the financial institutions rating group at ACRA.

“The lack of market regulation means the extremely significant discretion of BNPL market participants in determining the conditions for working with clients, including determining fines and other consequences of delay on the part of the client,” Roman Parkhomenko, partner at Pen & Paper, warns. At the same time, according to him, since the activity is not banking, there are no costs for the formation of reserves, “providers may well afford not to collect the debt forcibly, but simply stop working with a specific buyer and, possibly, sell the right to claim at a very high discount” .

Polina Trifonova