Market Loop - Gov tightens buy now pay later rules

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21st June 2022

Bite-sized business news from the UK and beyond

Good morning You may have heard that Kate Bush has stormed back to the top of the UK charts with her 1985 track ‘Running Up That Hill’ after the song featured on the Netflix series Stranger Things. What you may not know is that as Bush wrote, produced and has 100% rights to the song, she’s currently earning about £250,000 a week via Spotify streaming alone on the 37 year-old track.

Today's stories

Gov tightens buy now pay later rules
Primark dips toe into online retail

CONSUMER
Gov tightens buy now pay later rules

What happened?
Yesterday the government announced proposals to introduce stricter rules on buy now pay later (BNPL) firms.

How did we get here?
BNPL allows consumers to buy items online using interest free loans, often without a need for a credit check. Companies make money from the retailer, usually taking a cut from sales but there may be charges if customers miss payments.

It exploded in popularity across the world during the pandemic as ecommerce boomed.

Founded in 2005 the biggest firm, Klarna, saw user numbers jump by 70% in 2021 to 147m across 45 countries. The company has 15m customers in the UK alone. In recent years a number of new entrants have entered the market like Affirm and Zilch, as well a banking apps like Monzo and Revolut and traditional banks like Barclays.

But the industry has drawn criticism from debt charities that warn that the services encourage people to spend beyond their means. This led to a review by the UK finance regulator, the FCA, which recommended that more regulation was needed.

What’s the government proposing?

Lenders will have to make sure loans are affordable and that adverts are fair, clear and not misleading.

But the changes may not be introduced for at least another year because FCA will also need to consult on the proposals from the middle of next year. Debt campaigners say this is painfully slow, especially when many people may turn to BNPL this winter to cope with another steep rise in energy bills.

Other stories to keep you in the loop

Average UK house price hits £368,614 in fifth record this year
Heathrow asks airlines to cancel 10% of flights
Energy firms face limit on direct debit overpayment
Crypto industry on the brink as bitcoin struggles to stay above key $20,000 level
Rolls-Royce hands workers £2,000 to ease cost of living squeeze

RETAIL
Primark dips toe into online retail

What happened?
Yesterday budget retailer Primark announced a much-anticipated entry into ecommerce with the trial of a click and collect service later this year.

What took it so long?
For years Primark has been the odd one out of its high street peers by solely selling in store and not online. The company insisted that the low cost of its items and high cost of running an online business (processing returns, offering free delivery) meant that it didn’t make commercial sense.

But during lockdown when the high street was closed, having an online presence was vital and beneficial for retailers and Primark lost over £1bn in sales.

In January the company announced a U-turn and launched a website where customers could view items for the first time and check stock levels in store. The website has proved so popular that Primark is moving into trialling click and collect in 25 north east stores with 2,000 items or 40% of its range.

The news came as the company reported an 81% jump in sales in the three months to May compared to last year. Primark said the return of shopping for nights out and holidays boosted trading.

Last week fellow fashion retailers Asos and Boohoo reported disappointing sales citing that younger customers were started to cut back amidst the cost of living crisis. But Primark says its yet to see that same trend amongst its customers.

Stat of the day

A recent survey found that trust in the UK media has dropped from 51% in 2015 to 34% in 2022

Interesting links from around the web

How to get work done in a world of distraction
Is the economy actually bad, or does everyone just feel like it is?
10 ways to keep exercising in a heatwave

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