As Buy Now, Pay Later services continue to expand globally, regulators are increasing their scrutiny of compliance, consumer protection, and financial crime prevention practices. Openpay’s warning from New Zealand regulators highlights the growing expectation that BNPL providers maintain robust anti-money laundering controls and transaction monitoring programs. The case also reflects a broader trend toward treating BNPL products more like traditional credit offerings as the industry matures.
Buy Now, Pay Later (BNPL) vendor Openpay received a formal warning by New Zealand’s Department of Internal Affairs (DIA), also known as Te Tari Taiwhenua. They received the warning for non-compliance regarding anti-money laundering and terrorist financing laws. According to the DIA, “Openpay Pty Limited failed to establish, implement, and maintain an AML/CFT programme, and failed to adequately monitor accounts and transactions over an extensive period.” The company, which has been operating in New Zealand since 2013, was not alleged to be involved in these practices.
Openpay Partners with Global Commerce Providers
According to Mike Stone, Director FIA’s AML Group, “Openpay is taking steps to establish, implement and maintain an AML/CFT programme” and “DIA will continue to closely monitor Openpay to ensure their compliance.”
Openpay is an Australian fintech located in Melbourne and has been operating in New Zealand since 2013. According to its most recent annual report, the company currently has 321,000 active customers. And they partner with 4,100 merchants across Australia and New Zealand. Their vertical acceptance spans retail, automotive, healthcare, home improvement, and education. Earlier this year, the company announced a partnership with three global commerce providers. They are BigCommerce, Paycove.io, and Pretashop—increasing the company’s presence in the eCommerce market.
Affordability Checks and Dispute Resolutions
Openpay’s warning comes days after New Zealand regulators announced plans to require BNPL providers to conduct affordability checks on customers above a proposed value of NZ$600. Other credit products, such as credit cards and personal loans, will have similar protections with the affordability checks. How these checks will be implemented has not yet been decided by the government. The proposed regulation will also require providers to provide a dispute resolution scheme, again, similar to other credit products. The government is expecting final regulations in 2023.
Facts About the Buy Now, Pay Later Market in New Zealand:
- The New Zealand BNPL market grew 125% to NZ$1.7 billion in 2021 from NZ$755 million 2020.
- The average BNPL transaction from 2020-2021 was NZ$210 an increase of NZ$10 from 2019-2020.
- The typical user of BNPL services in New Zealand is aged 45 or under.
- As of November 2021, there were seven providers of BNPL services in New Zealand: Openpay, Laybuy, Afterpay, Zip, humm (formerly Oxipay), Klarna and Genoapay (Latitude). These providers are all located offshore.
The regulatory action against Openpay demonstrates that compliance expectations for BNPL providers are continuing to rise. As governments introduce affordability checks, dispute resolution requirements, and stronger anti-money laundering standards, BNPL companies will need to invest in risk management and compliance infrastructure. For the long-term success of the BNPL market, balancing innovation with responsible lending and regulatory compliance will remain essential.
Overview by Ben Danner, Research Analyst at Mercator Advisory Group.
