THE LAW FIRM OF HAZIM AL MADANI ATTORNEYS AND LEGAL CONSULTANTS
Buy Now, Pay Later Companies in the Kingdom and Their Regulatory Rules
In recent years, the Kingdom has seen significant developments in the field of digital financial services, especially in the field of buy now, pay later (BNPL), which allows consumers to purchase goods and services online and pay for them later under favorable terms. This type of payment has become popular among young people and online shoppers, as it provides them with flexibility and ease in shopping.
A BNPL company is a joint stock company licensed by the Saudi Central Bank, and its primary role is to carry out the BNPL activity, which is based on financing the customer to purchase goods or services from stores without any due cost to the customer.
With the increasing prevalence of these services, several risks and challenges related to protecting consumer rights and ensuring the safety and stability of the financial system have emerged. For this reason, the Capital Market Authority in the Kingdom issued new regulatory rules for BNPL companies, aimed at defining standards and conditions for practicing this activity, improving the quality and transparency of services provided, and ensuring BNPL companies comply with preventive procedures against money laundering and terrorist financing.
A BNPL company is a joint stock company licensed by the Saudi Central Bank, and its primary role is to carry out the BNPL activity, which is based on financing the customer to purchase goods or services from stores without any due cost to the customer.
With the increasing prevalence of these services, several risks and challenges related to protecting consumer rights and ensuring the safety and stability of the financial system have emerged. For this reason, the Capital Market Authority in the Kingdom issued new regulatory rules for BNPL companies, aimed at defining standards and conditions for practicing this activity, improving the quality and transparency of services provided, and ensuring BNPL companies comply with preventive procedures against money laundering and terrorist financing.
The most important and prominent of these rules issued by the Capital Market Authority include:
- - BNPL companies must obtain a license from the Capital Market Authority before practicing their activity.
- - Putting guarantees for consumer rights, including the right to withdraw from BNPL contracts within a specified period without fees or interest.
- - Providing consumers with sufficient and clear information about the terms and effects of BNPL contracts.
- - Maintaining accurate and updated records of all their operations.
- - BNPL companies should have tracking systems for effective risk management and dispute resolution policies.
- - Protecting consumers' data privacy.
This step confirms that the Capital Market Authority is keen to support digital transformation in the finance sector and encourage competitiveness and innovation in this field while considering consumer interests and community safety. The Authority hopes that these rules will help raise consumer confidence in BNPL companies and enhance their role in achieving financial inclusion and developing the national economy.
In addition, we want to mention the regulatory rules for BNPL companies in the Kingdom:
- - Company Licensing: BNPL companies must obtain a license from the General Authority for Financial Supervision to practice their activities in the Kingdom. This requires compliance with a set of defined requirements and conditions to ensure the safety of operations and protect consumer rights.
- - Transparency and Disclosure: Transparency and disclosure are important when dealing with BNPL companies, as companies must provide clear and comprehensive information to consumers about financing terms, interests, due installments, and any additional fees that may apply.
- - Credit Evaluation: BNPL companies rely on credit evaluation to determine the level of risk associated with each consumer. The consumer's credit record and financial history are analyzed to estimate their ability to repay the amounts due based on defined terms and standards.
- - Interest and Fees: BNPL companies must clearly and detailedly define the interest and fee structure for consumers. The interest rate to be applied on the due amounts should be determined, in addition to any additional fees such as late fees or administration fees.
In conclusion, we want to point out that the regulation of BNPL companies plays a role in enhancing the local economy and stimulating commercial activity by facilitating access to goods and services and encouraging consumption. These companies can contribute to increasing commercial revenues and enhancing economic growth. Every individual and every company in the BNPL market in the Kingdom must comply with the applicable rules and regulations. Compliance with legal requirements is necessary to ensure a fair competitive process and protect consumer rights.
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