How Pay and Purchase Advances will change in 2022.

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How Pay and Purchase Advances Could Change in 2022
BNPL and paycheck advance companies could draw the attention of competitors and regulators in 2022.
Annie Millerbernd Lead Writer • Personal loans, "buy now, pay later" loans, cash advance apps Annie Millerbernd is a NerdWallet authority in personal loans. Prior to joining NerdWallet in the year 2019 she was a news reporter in California and Texas, and as a digital content specialist for USAA. Annie's work has been cited by the press and was included by The Associated Press, USA Today and MarketWatch. Annie has also been quoted by New York magazine and appeared as a guest on the NerdWallet's "Smart Money" podcast, in addition to local TV and radio. She is based at Austin, Texas.





Dec 9, 2021


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It's been an exciting year for alternative financing options such as "buy now, buy later" and cash advance applications.
companies offer at-checkout financing which allows shoppers to divide the cost of a purchase into smaller installments. Paycheck advances can be arranged by companies or apps, and allow consumers to access the expected income prior to the payday.
Both financing plans provide fast cash for those who are strapped for cash They have both gained popularity in the last few years, particularly since the pandemic threw finances into chaos.
The increasing use of these options as they increase, regulators and competitors have sat up and taken note. These emerging financing options could change in 2022.
Banks create a BNPL presence
BNPL is expected to account for 6% of all U.S. dollars spent online this year, according to the study released in September by the consulting firm Accenture and commissioned through BNPL the company Afterpay. By 2025, that number is projected to be 13%.
At present the BNPL market is being dominated by apps like Afterpay and Affirm, as well as some credit card companies. In the coming year, big banks may launch BNPL alternatives of their own, according to Ruby Walia, senior advisor for digital banking at digital consultant Mobiquity.
"Banks do not want to give up business to fintech companies," he says. "If they have the ability to provide an own, bank-branded BNPL service to customers, they'll eventually do that."
Banks might offer co-branded BNPL service with an retailer like co-branded credit card that many have, he suggests. It is also possible to replicate credit cards' take on BNPL and let customers divide debit card purchases into smaller installments following the purchase.
There is a chance that the popular paycheck will be in competition for advances
Businesses partner with companies like DailyPay to allow employees to dip into their expected earnings early. Customers can also download apps such as Earnin or Dave which analyzes your bank account or tracks your work hours to determine how much you're paid, and at what time you're able to access some of the money and pay it back when you get the next payday.
Some of the country's largest employers including Target, Walmart and Amazon included -- already offer .
In 2020, people utilized a pay advance service almost 56 million times for an amount of $9.5 billion according to a research from research and advisory firm Aite-Novarica Group. This is up from 37.2 million uses totaling $6.3 billion in the year prior to 2019.
Where there's demand there's competition, it follows. The need for innovation is no doubt present in the constantly evolving financial technology market, according to Brian Tate, CEO and president of the Innovative Payments Association, which advocates for the electronic payments sector. He says he welcomes newcomers.
"Where we are at the moment is a vastly different place from the state we were in five years ago, or three years ago," He says. "Our hope is that there's more competition, and more providers, and I think this is a benefit for the customer."
Regulators are coming up
Legislators and regulators have been considering the rules that should be applied to BNPL and payday advance companies in recent times. In November members of the House Committee on Financial Services held a hearing on emerging fintech companies to explore the advantages and disadvantages of both forms of financing.
Advocates for consumers say BNPL companies and cash advance services offer credit and should enjoy the same protections for consumers as credit card issuers as well as personal loan lenders.
"Our view has always been with both products that they're loans. Someone has loaned you money, and you pay it back at the end of the month," says Rachel Gittleman Financial Services Outreach Manager at the Consumer Federation of America, an advocacy group for consumers.
But advocates for new financial products say that too many regulations could restrict creativity.
"No matter what product you're talking about, these are new products," Tate says. "They're different as the products in the sense that people might already be familiar with."
Paycheck advances might not be getting regulators' attention now however they may in the coming years, he says.
The Consumer Financial Protection Bureau issued an advisory opinion in the year 2020 that a few advances that are made through an employer aren't considered as credit in the Truth in Lending Act, which regulates the majority of consumer credit. In the days following Rohit Chopra was confirmed earlier in the year to be the new CFPB director, consumer groups sent an email to the director in support of his decision to change the opinion.
How do you make these financing choices work?
Lack of regulation and the proliferation of new products puts it the responsibility of the customer to research, compare options and plan prior to using a brand innovative financial instrument.
Here are some suggestions to ensure you're on the right course when you are trying out the latest kind of finance:
Do your research. No two BNPL organizations or pay advance services have the same fees and terms. So you need to read about the company to understand the advantages and disadvantages, advises an Illinois-based certified financial planner Maggie Klokkenga.
Be aware of your . If you're taking a few tiny installment loans or taking some of your paycheck early will impact your budget. Knowing when you'll need to pay back and what will be available to pay at that time will aid you in avoiding overdrawing.
Monitor your usage. New services like BNPL and payday advances can be utilized safely if you're expecting the repayment. Keep track of how many BNPL services you use and how many outstanding advances are available, to prevent missed payment and late charges.




About the author: Annie Millerbernd is an individual loans writer. Her work has been published on The Associated Press and USA Today.







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