Zip share price charges higher as BNPL regulation looms large

The Zip Co Ltd (ASX: ZIP) share price is marching higher in morning trade today, up 1.9% at the time of writing, having earlier posted gains of 4.6%.

Shares in the buy now, pay later (BNPL) stock closed on Friday trading for 71 cents and are currently changing hands for 79 cents apiece.

And there’s plenty of interest. More than $1.9 million worth of trades has been executed within the first hour of the opening bell, with more enthusiastic buyers than sellers pushing the Zip share price higher.

All this comes as news hits the wires that federal regulation is looming for the Aussie BNPL sector.

Why are regulators eyeing the BNPL sector?

The Zip share price has shrugged off potential concerns over pending new regulations intended to protect Australian consumers.

BNPL providers are bound by certain regulations. But they don’t face the same legal guidelines as credit card companies.

And with BNPL companies like Zip servicing a largely younger customer base, regulators are concerned that some of their clients could get into serious financial difficulties using their interest-free, pay-by-instalment plans.

According to Finance Minister Katy Gallagher (courtesy of The Australian Financial Review):

People are starting to see it as a credit card. Whether or not it should be included under the credit card regulations, so under the Credit Code, to give people some protections and also put some responsibility back on the providers, [are] about ensuring that people are able to afford to get into the contracts that they’re entering into.

Gallagher indicated that more BNPL customers are already having trouble making their repayments.

“Certainly, if you talk to consumer representatives in the financial sector, they’ll say that they’re seeing more and more people who are getting into strife with buy-now-pay-later,” she said.

Judging by the reaction of the Zip share price this morning, investors may believe that some additional regulatory scrutiny could be healthy for the BNPL stock moving forward.

“It’s responsible to have a look at how it is regulated and how people are using it, what some of the problems are and how to provide that protection to people,” Gallagher added.

Zip share price snapshot

Down 83% in 2022, the Zip share price has enjoyed a strong rebound over the past month, gaining 27% since 21 October.

For some context, the All Ordinaries Index (ASX: XAO) is down 6% for the calendar year and up 7% over the last month.

The post Zip share price charges higher as BNPL regulation looms large appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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