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Banca d'Italia has hinted at new buy now, pay later (BNPL) regulation, despite only receiving five complaints regarding the deferred payment method in 2021. Meanwhile, fraud continues to be the biggest issue faced by consumers.
BNPL has continued to court scrutiny from Europe’s regulators, with Italy’s central bank stating that BNPL now made up some of the complaints received, as part of its annual report on complaints from the customers of banks and financial institutions.
Despite the number of complaints totalling just five, the quasi-credit product is the subject of “attention by the institute as the form of the transaction could lead to the assumption of debts higher than those sustainable,” the Banca d'Italia cautioned.
Italy’s financial regulator also said the low number of complaints in 2021 was “attributable to a rather limited diffusion of this type of transactions in the Italian market”.
The Italian market is home to BNPL firms including Klarna and homegrown Scalapay, which Italy’s postal service invested $27m into in May this year.
The handful of complaints concerned a variety of issues, according to the regulator, including the mismatch of the purchased product with the consumer's expectations, as well as operational inefficiencies.
Earlier this month, Denmark’s financial regulator began consulting on including third-party BNPL providers in the scope of the country’s consumer credit rules. Under new proposals, sellers offering BNPL arrangements with a duration of more than 90 days will become subject to the requirements.
Fraud high
Although consumer issues with BNPL appear relatively minor, this is in stark contrast to fraud. Fraud was the most complained about topic according to the central bank, a topic that it warned has been increasing significantly since 2019.
A total of 622 and 122 reports in 2021 and in the first quarter of 2022, respectively, were related to scams, according to the central bank.
In comparison, in 2020, there were 200 complaints for the whole year, meaning a 211 percent increase.
In 47 percent of cases in 2021, the scams related to credential theft, such as attempting to get authentication codes as well other personal data to complete a fraudulent transaction.
Meanwhile, Banca d’Italia received 27 complaints related to crypto-assets, up from ten in 2020.
In almost all these cases the complaint involved fraud, which the central bank suggested was often carried out through offers by fake consultants who contact the victim to propose false profitable investments.
Access to financial services was another important issue of complaint, according to Banca d'Italia.
Numerous bank closures have been notified to the authorities, with the regulator pointing out that a number of municipalities — around 40 percent — are no longer served by banking services, especially in mountainous areas.
Complaints also revealed difficulties in accessing banking and financial services, in particular by the most vulnerable segments of the population, such as the elderly and people with disabilities, who are more likely to be excluded by the presence of logistical or technological barriers.
Banca d'Italia has said that it is closely monitoring the effects on local communities, suggesting that a balance must be found between the changes affecting the banking sector, mostly deriving from the entrepreneurial choices of operators, and the need for financial inclusion.
In 2021, 106 complaints were also received relating to difficulties in opening or maintaining a bank account, up from just 30 in 2020.
This aligns with Europe’s general de-risking problem, which has been highlighted by the European Banking Authority as well as national authorities such as the National Bank of Belgium and the Bank of Lithuania.
More than 60 percent of the complaints concerned the bank terminating a relationship, while the remaining cases concerned the refusal to provide services in the first place.
