Washington D.C. – November 2, 2021 – Penny Lee, CEO of the Financial Technology Association, testified today before the House of Representatives Committee on Financial Services, Task Force on Financial Technology, for the hearing “Buy Now, Pay More Later? Investigating Risks and Benefits of BNPL and Other Emerging Fintech Cash Flow Products.” Her testimony focused on the benefits of technology-driven innovation and the value of Buy Now Pay Later (BNPL) products for U.S. consumers and small- and medium-sized merchants across the country.
Below is an excerpt from Ms. Lee’s written testimony:
Technology-driven innovation is transforming the way we offer, access, and benefit from financial services and markets in the United States. By using internet and mobile platforms, machine learning, automation, and other modern technologies to deliver financial products and services, financial technology (or “fintech”) companies are improving efficiency and transparency, broadening equity, access and inclusion, reducing costs, and increasing choice and opportunities for consumers and businesses.
● They are typically lower cost, charging little or no interest or fees, unlike credit cards, which make the majority of their revenue from interest charges and have been found to cost vulnerable consumers up to 225% of product purchase value in interest expenses.
● They are typically more transparent, helping consumers better understand – and hence control – their finances.
● They typically help users budget, and as a result, help manage cash flow and avoid risky debt products.
● They are typically more flexible and offer more relief when consumers face an unexpected emergency; and
● They typically result in less debt and repayment takes place over shorter terms.
BNPL products are structured to have payment terms that require consumers to pay for a purchase in a matter of weeks or a few months. This contrasts with revolving credit and high-interest products that may take years to pay down, blur the cost impact of a purchase, and oftentimes keep consumers in a vicious cycle of debt due to continuous interest charges or rollovers.